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A succession of lenders have launched new mortgages this month already

After a pretty quiet September in the mortgage market October was kicked into action with no less than five lenders announcing rate cuts in the last week.

Spanish giant Santander got the ball rolling on the first of the month, announcing it was cutting its five-year fixed rate deals by up to 0.26% to 4.49%, if you have a 30% deposit, and 4.99% if you can only muster 25%. They are decent deals and the cuts are welcome, but they can be beaten, as the tables below show.

It also launched a fee-free two-year tracker at 3.29% for those with a 25% deposit, which is a great deal, but HSBC later pipped it by offering the same rate, fee-free for those with just 20% upfront – even better it’s a lifetime tracker so there are no Early Repayment Charges.

The Post Office followed the next day with a round of cuts, making its already competitive deals even more so. Highlights include its three-year fixed rate at 3.35% for those with 35% upfront and the lender also has a great range of deals up to 80% and 90% of the property’s value.

New week, new deals

This Monday the mortgage market cranked it up a gear with three lenders slashing their rates and introducing new products.

NatWest launched a fee-free 2.75% remortgage deal for those with a whopping 50% equity – it comes with £250 cashback and is available its branches and phonelines only.

Norwich & Peterborough Building Society cut a range of its rates and introduced two new discounted rate mortgages – 2.95% for two years at 85% loan to value (LTV) and 3.95% for five years at 80% LTV. The two-year deal looks particularly good.

But Yorkshire Building Society trumped the lot with a stonking range of five-year fixed rates that includes a market-leading deal at just 3.89% for those with a 40% deposit and only 3.99% for borrowers with 25% upfront (both come with a £995 fee).

And finally HSBC cut a range of its rates at 80% loan-to-value, as well as launching the fee-free tracker mentioned above.

Lenders have now been chipping away at their rates for most of 2010, but how low can they go?

Bottomed out

There is now a strong argument that mortgage pay rates have bottomed out. The cheapest trackers come in at 1.69% above Base Rate and I’d be surprised if that margin was squeezed much further. We live in a different world now compared to the ‘boom years’ and not only do lenders need to repair their balance sheets, they still have limited funds to lend. The supply and demand imbalance remains in the mortgage market, and it’s still in the lenders’ favour.Fixed rates have also come down massively, to their lowest level in seven years during the summer. Average rates have ticked up slightly since but they are still extremely low when you look at historic fixed rates (even if margins are wide).

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There is of course, the looming threat of a hike to the Bank of England’s Base Rate to consider, which would certainly impact on mortgage rates – both existing and new deals. It increasingly looks like Base Rate will stay low until the middle of next year, but it could be sooner, and there is no limit as to how high it can go.

What does this mean for you?

If you are free to remortgage, but you are waiting to see what happens to rates, it could be worth a rethink. My opinion, and that’s all it is, is that mortgage rates have pretty much bottomed out. I don’t think they will fall much further and if they do, it will only be by the tiniest amount. There is a far greater risk that they will increase.

Now is a great time to get a mortgage. Indeed, perhaps it will be the best time for the next few years.

If you are buying a property or looking to remortgage, below are some of the best mortgages around at the moment.

15 fabulous variable rates

20 top fixed rates

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article. 

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender’s standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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