Tracker rates reach record low

Tracker mortgage rates fell to a record low during January as competition continued to return to the mortgage market, figures reveal.

The average interest rate charged on one of the deals dropped to 3.63% from 3.92% during the month, the lowest level since Bank of England records on the product began in 1997.

There was also an improvement in the cost of fixed rate mortgages, with two-year loans falling to an average of 3.97%, a level last seen in July 2003, while the cost of a five-year deal dropped by 0.12% to 5.55%.

Competition in the mortgage market has been steadily improving since the beginning of the year, with more than 300 new mortgage products launched during January, while a flurry of lenders also cut their rates on existing deals.

But more significantly, there has been a big improvement in the number of deals available to people with only small deposits, with a 26% jump in mortgage availability for people borrowing up to 90% of their home's value during January.

Commentators said the move showed lenders were feeling increasingly optimistic about the housing market, following 12 months of rising house prices, while they were also more confident about pricing in risk.

This trend has continued into February, with Nationwide yesterday announcing that it was reducing the minimum deposit people needed to put down to qualify for its best rates from 40% to 30% on nearly half of its mortgage products.

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