In the United Kingdom, Bank of England Halifax, Nationwide along with some other banks have cut interest rates, lower home loans rate, HSBC had also bring down the 2 year fixed housing loan rate to 0.99%. Which is a shocking news in the industry. It is a sign that the clarion call for interest rate cuts has begun.
Halifax and Nationwide Building Society, the two big Mortgage Bank had recently announced a comprehensive reduction in housing lending rates, the average rate is 0.3%, to attract the majority of first time housing buyers. After the interest rate cut, the current Halifax Bank’s 2 years fixed housing loan rate is 3.44% , the product fee is 1,499 pounds, 5 years fixed housing loan rate is 3.99% , the product fee is 999 pounds.
For the nationwide, the 2 years fixed housing loan rate after the interest rate cut is 3.89% (95%LTV), product fee 999 pounds, the 3 years fixed housing loan rate is 4.39% (95%LTV), product fee 999 pounds,, and the 5 years fixed housing loan rate is 2.19% (60% LTV), product fee 999 pounds, 10 years fixed housing loan rate of 2.99% (LTV not announced yet), product fee 999 pounds.
(Note: LTV is the short for Loan To Value, loan to housing price ratio. Two other banks had also offered different loan rebates for first time housing buyers.
The HSBC bank also reacted with a “more ruthless” announcement, announcing a second reduction in mortgage rates, or 2 years fixed loan rates of 0.99% (a maximum loan of £ 500,000 ), which became the UK’s first 2 years housing loan fixed rate of less than 1%. However, interest rates have been lowered, but at least 35% of the deposit is to be delivered, and a extra fee of £ 1,499 is charged. LTV ratios need to consult to the banks.
What HSBC did was considered meant to be aimed at cutting interest rates in addition to the two banks above, and to compete with a 2 years loan fixed rate at 1.14% Yorkshire Building Society, another big mortgage lender, at £ 1,345.
One of the London loan manager has said the bank’s interest on home loans was surprisingly low, with interest rates 1% lower than the 5 year fixed rate product. But it also sets a new benchmark for the current 2 years fixed rate loan, with a bank acting and other banks set to make plans to catch up. Although the cost of related products is not low, but for other products in the same industry is not the highest number of the first few. With this Rate cutting War, some economists predict that some fixed term average home loan rates will fall to a new phase of 0%-0.5%.
Although recent interest rate cuts have been repeated in major banks, it is necessary to note that interest rate cuts are often targeted at certain products. Since the Past month, in the UK, the average rate of 2 years fixed rate housing loans actually rose, from 2.56% to 2.58%, while the 5 year and 10 year interest rates were generally lower, respectively 3.16% and 3.46%, both are lowest in history. (Data source: Moneyfacts June 2016)
For housing mortgage loans, it’s definitely not the lower the interest rate is better, buyers also have to refer to the product term, loan mortgage ratio, related costs, the ability to repay their mortgage, there are many things need to be take into consideration, before make the final decision on which type of loan to apply for. For example, the new product of HSBC, although the interest rate is surprisingly low, but the cost of the product is really not low, and 2 years in fact not very long, especially for the borrowers it can be really fast. Whether you can get everything done within 2 years will be measured by the lenders themselves, and the price of the supporting loans for the products will need to be carefully studied.