Mortgage price war heats up with loan rates falling to a record 0.83% (2024)

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The summer mortgage price war is heating up with two-year fixed rates plunging to a record-low 0.83 per cent.

Mortgage rates are tumbling as lenders are forced to fight harder for borrowers as the stamp duty holiday is wound down.

But while experts predict more cuts are on the way, they warn that the rate war is unlikely to last long.

The new deal from Halifax, which will be available to buyers with a 40 per cent deposit from Monday, is the lowest two-year deal ever seen.

It was unveiled as house prices rose yet again in July despite the Government’s stamp duty holiday tapering off. The average UK home is now worth £261,221 after prices climbed by 0.4 per cent last month compared to June, according to the Halifax House Price Index.

Halifax’s deal comes just weeks after Nationwide launched the first ever five-year rate under 1 per cent. On a typical £200,000 home loan, monthly repayments with Halifax’s deal would work out at £738. There is a £1,499 fee and the loan must be taken out through a broker.

Halifax has also launched a two-year fix at 0.87 per cent with a £999 fee, which could work out cheaper for borrowers taking smaller loans.

Lewis Shaw, of broker Shaw Financial Services, said: ‘The new rates from Halifax are stupendously low. I’ve never seen anything like this.’

Doug Miller, from Lansdown Financial Services, said: ‘The market is becoming fiercely competitive. But like all good things, this will come to an end shortly.’ The rise in house prices was clearest in Wales, which has seen a boom in buying activity during the pandemic. Prices rocketed at their fastest annual rate since 2005, with a home now costing on average 13.8 per cent more than a year ago.

But across the UK as a whole there were signs the red-hot property market was beginning to cool. Prices on average have risen by 7.6 per cent compared to July last year – the slowest annual rate of growth since March, when the winter lockdown was coming to an end.

And the 0.4 per cent month-on-month rise only partially recovered ground lost in June, when prices fell 0.6 per cent from an all-time high in May.

A separate index from Nationwide last week suggested prices had even slipped by 0.5 per cent between June and July.

But Lucy Pendleton, of estate agents James Pendleton, said: ‘The housing market is plateauing, not peaking, and London is getting its mojo back as the country returns to normal. A softer annual growth rate is simply a symptom of the pressure coming off buyers a little. There’s no longer a reason to compromise on price for the sake of speed.’

Chancellor Rishi Sunak introduced the stamp duty holiday during the pandemic last year in an attempt to get the housing market moving after the first lockdown.

It originally meant buyers had no tax to pay on the first £500,000 of property purchases. But from the start of July that threshold has been brought down to £250,000.

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