Borrowers' confidence returns as mortgage rates fall

For large parts of 2008 borrowers coming to the end of 2 and 3 year mortgage deals have been increasingly staying on their lender's standard variable rate (SVR) because the new fixed and tracker rate options were proving too expensive.

Since rates have started to nudge down however there are increasing signs that the attitude of borrowers is changing as they select new deals to move on to, often with different mortgage providers.

Rates are now well below 6.00% as the cost of interest rate swaps used to price fixed rate mortgages has declined. As a result Yorkshire Building Society recently reduced rates on its fixed rate mortgage range by up to 0.55% and has since seen application levels double.

Tom Girling, Mortgage Product Manager for the Society said, "We are pleased to have seen application levels pick up. It is clear that our recent launch of a 5.54% 2 year fixed rate with a £895 fee has triggered a swift uplift of applications. Now that there is clear water between typical SVR's of over 7.00% and the best 2 year fixes it has focussed borrowers attention on getting their monthly costs down."