Woolwich Introduces a Cheap Mortgage Deal

As we have already reported, UK lenders – banks and building societies – have recently started a new battle against each other. They attempt to attract as much cash-rich borrowers as possible by offering mortgage deals at record low interest rates. However, mortgage brokers and other mortgage industry experts say that these low interest rates do not mean that mortgages have become more affordable for general public. The latest British lender to enter the battle is Woolwich, a member-bank of Barclays that specialises in mortgages. Latest tempting mortgage deal, which has been launched by Woolwich on Thursday, September 17th, is offered at a mere 1.98%. The deal is a 1-year tracker, which aims to compete with the newly launched deal by HSBC (let us remind that on September 7th we reported the launch of a new HSBC mortgage deal offered at 1.99%). Although banks’ analysts expect the new low-rate mortgage deals to improve the situation on the mortgage market, which has seen almost no competition lately, mortgage brokers accuse UK lenders of continuing the restrictive lending policy as the cheap mortgage deals are only available to cash-rich and creditworthy customers rather than to general public as they require a 40% deposit. It is to be noted that an average interest rate charged by Woolwich for borrowers, who can provide a deposit of 15% (typically, these are first-time buyers), is 6.99%. According to the information presented by London & Country Mortgages, a UK mortgage broker, the number of new borrowers who are able to provide lenders with a 40% barely reaches 50%. Although the cost of mortgage deals was expected to decrease this week as swap rates fell to record low levels on Tuesday, September 15th, some lenders went on to actually increase the cost of mortgages. As such, the Royal Bank of Scotland raised the cost of its 5-year fix that requires a 10% deposit and a fee of £999 from 7.24% to 7.49%.