Halifax reshuffles mortgage rates

Halifax has announced it is to reorganise the interest rates on its mortgage products, rewarding those with a larger deposit.

Borrowers with small deposits will face lower interest rates and on average Halifax rates will rise 0.2 per cent.

Heather Scott at Halifax denied the lender had been overwhelmed by applications and rises in business as other lenders increased rates was a case of "swings and roundabouts".

"We are re-pricing in response to changes in the mortgage market."

She added: "We still offer mortgages at attractive rates. First-time buyers can still get up to 95 per cent loan. We are helping first-time buyers."

She added new products to be launched on Monday for first-time buyers would offer rates from 5.49 per cent. A five-year fixed-rate deal with an interest rate of 5.69 per cent on loans up to 90 per cent will also be launched.

The UK's biggest mortgage lender follows Nationwide and HSBC – along with other lenders – in shaking up its mortgage range amid the current credit squeeze.

The move also puts further pressure on the Bank of England to cut the base rate next week.

Ms Scott said Halifax would respond to any interest rate change when it happens.

Under the changes the highest loan-to-value (LTV) rate - the amount that can be borrowed against the value of the property – has been dropped from 97 per cent to 95 per cent.

Halifax – part of the HBOS group – will introduce three LTV bands – so those with 25 per cent deposits or more will receive a 0.1 per cent cut interest rates.

Those with deposits under 25 per cent will face on average a 0.14 per cent increase.

Halifax claims 70 per cent of its new customers put down a deposit of more than 25 per cent.

Both Bank of Scotland and Intelligent Finance will also follow suit.
The move was expected by the industry, if a little surprising in timing.

"This move by Halifax reflects the mortgage changes that we have seen over the last couple of weeks. Lenders have to balance out the risk they are taking on, so it's no surprise that Halifax are looking to attract the low risk borrowers," explained Denise Blake, senior mortgage analyst at Moneyfacts.co.uk.

"Increased rates on high loan to values spells bad news for first-time buyers and remortgagers with little deposit. Anyone looking for a high loan to value (LTV) is going to have a much harder time than they did six months ago.

"Despite these moves Halifax continues to offer competitive mortgages, especially for those with a larger deposit. Anyone interested must act fast as competitive products are not hanging around for long."