Mortgage Rates hit record low as 90% LTV return

Mortgage rates on tracker deals, which move in line with the Bank of England base rate, plummeted to a record low in January, providing a much-needed boost for borrowers and the housing market.

Figures out today from the Bank of England show that the average rate charged on tracker mortgages that have a 25 per cent deposit fell to 3.63 per cent in January, down from 3.92 per cent in December and the lowest rate recorded since comparable records began in 1997.

The rate on two-year fixed-rate deals also fell to a six-year low of 3.97 per cent, down from a high of 6.35 per cent in June 2008.

But while lenders are becoming keener to attract customers, borrowers with smaller deposits are still being forced to pay much higher rates.

The Bank stopped collating information on 95 per cent loan-to-value mortgages in 2008 as there were so few on the market. But there are signs that lenders are becoming more willing to lend to borrowers with smaller deposits, although there is unlikely to be a return to the abundance of 95, 100 and 125 per cent mortgages seen before the credit crunch.

The number of deals available to people who need to borrow up to 90 per cent of the value of their home jumped by 26 per cent in January, while Nationwide yesterday said that it was reducing the minimum deposit people needed to put down to qualify for its best rates from 40 per cent to 30 per cent on nearly half of its mortgage products.