Consumers urged not to be drawn in by headline rates

Commenting on the launch of Halifax's 2.99 per cent two year fixed rate mortgage and Woolwich's 1.98 per cent tracker mortgage, Hannah-Mercedes Skenfield, mortgage spokesperson at moneysupermarket.com, said; " There is no doubt that the mortgage market is in need of some good news and lenders lowering rates should offer just that however these products underline a growing trend in the mortgage market, which is that much of the innovation seems to be targeted for marketing impact, rather than real borrower benefit."

Hannah-Mercedes Skenfield continued; "Any reductions in mortgage rates are welcomed however, with all these low rate offers flying around, borrowers could be forgiven for thinking that lenders really are beginning to loosen the purse strings again. The vast majority of the market is unable to access these deals as nearly all new headline rate launches are restricted to a minimum of 60 per cent LTV. moneysupermarket.com figures show that only 33 per cent of potential borrowers have this kind of deposit.

"Even those that do have the necessary funds would be well advised to get out the calculator and see whether or not the deal works for them. Halifax's 2.99 per cent fixed rate mortgage, for example, works out more expensive than some higher rate products as it charges a whopping 2.5 per cent arrangement fee.

"It would be great to see providers launching products that would benefit a greater proportion of the market, rather than chasing headlines. The majority of people looking for a mortgage don't have a 40 per cent deposit, and might not realise the extent to which the arrangement fee affects the real rate of return for the lender. Unfortunately for now, the market is cluttered with products that look great in the branch window, but are not adding value to consumers.

"Choosing a mortgage is one of the most important financial decisions we make in our lives, so it makes sense to shop around and do the maths to make sure you get the best deal possible, rather than be seduced by a headline rate."