'Exceptional opportunity' for buyers after interest rate cut

THE historic cut in interest rates has created an "exceptional opportunity" for thousands of would-be house buyers and homeowners in the capital, experts said today.

Banks and building societies are now offering some of the best deals available in years to anyone with a deposit – ideally of 15 per cent – or who has built up equity in their home.

HBOS is among those to have already announced they would pass on the full 0.5 per cent cut to existing customers with Standard Variable Rate or Tracker mortgages, while RBS is still considering its reaction.

The reduction will knock around 40 a month off a 150,000 mortgage, while those with a 250,000 home loan will be 66 a month better off.

People on tracker rates will have seen their repayments fall by around 350 a month for those with a 150,000 mortgage and by 580 a month for those with a 250,000 loan since October.

Repeated cuts have already led to city customers being offered a wide range of good mortgage deals. And Craig Esplin, owner of Edinburgh-based broker firm Fair Deal Mortgages, said customers in the Capital were likely to benefit further from those lenders who passed on the cut.

"Customers on existing mortgages will benefit if their lenders pass on the latest cut," he said. "They will see another substantial drop in their monthly payments."

Mr Esplin added that buyers seeking a mortgage can choose from a number of great deals from lenders.

"The best deal at the moment for a 25 per cent deposit is from RBS," he said. "That may be because the Government now has a stake in the company and they are encouraging them to lend. RBS could also be trying to get back into a market that they've lost some ground in.

"The RBS deal at 25 per cent deposit is 3.40 per cent. The deal I had from Lloyds TSB two years ago for that was 5.25 per cent.

"It's a good time for buyers if they have a deposit, preferably 15 per cent or more.

"With 25 per cent and up there are very good fixed rates deals available. Fixed rates can also give peace of mind if you take a three or five year deal in case the rates start going back up again.

"But a lot of people are waiting to see if property prices fall even further. Only then will they decide to get back into the market."

Halifax, Lloyds TSB, Nationwide and Barclays' lending arm the Woolwich have all reduced their variable rate mortgages by 0.5 per cent.

Simon Rettie, managing director of property agent, Rettie and Co, said: "This is an exceptional opportunity for those who have the facility to enter the market in Edinburgh. The interest rates have never been lower.

"If people have the ability, they can move up disproportionately quickly up the property ladder than they would otherwise."

Lloyds TSB has also announced it would pass on the full 0.5 per cent cut to customers, and while many of the major lenders have still to decide what they will do, it is likely most will pass on some saving to existing customers.

Mr Rettie said: "If those cuts are passed on, it's got to be unprecedented in history to have such low rates.

"They're certainly not lending on the same terms as they were a few years ago. They are much more comfortable if you can put up a sizeable deposit."