Halifax targets current account customers with low mortgage rates

Published 22nd Jan 2009

Britain's biggest lender unveils lowest ever new mortgage rate as it seeks to tie-in customers

Halifax, part of Lloyds Banking Group, has joined the growing list of lenders offering tantalising mortgage rates to borrowers who promise to switch current accounts.

Britain's biggest lender has launched a new mortgage fixed at 2.99 per cent for two years, its lowest ever new mortgage rate. The rate comes with a hefty 2.5 per cent fee for borrowers with a 40 per cent deposit.

But this isn't the only catch. The deal is only available to existing homeowners with a Halifax current account, or to new customers willing to switch.

Francis Ghiloni, of mform, the online broker, said: “The return of tie-ins is yet another product of the mortgage market squeeze as lenders increasingly look for ways to boost profits in a low interest rate environment. Signing customers up to current accounts is a good way for lenders to ensure they tie-in borrowers for as long as possible but it is not always good for customers."

The new 2.99 per cent fix is only available directly from Halifax. It is also offering a stepped-fixed rate of 2.99 per cent in the first year rising to 4.99 per cent in the second year. This has a smaller fee of £995 and does not require customers to open a current account. Stepped fixes were common in previous years, but have fallen out of favour with lenders.

Rob Gill, senior consultant, Cobalt Capital, the mortgage broker, said: "This is an attractive headline rate, but as always the devil is in the detail. A hefty arrangement fee of 2.5 per cent means this product only makes financial sense for smaller loans."

Halifax cut mortgage rates by up to 0.48 percentage points today on 38 fixed-rate and tracker deals. A three-year fixed-rate deal for borrowers with a 15 per cent deposit has fallen from 6.32 per cent to 5.84 per cent. It has a £995 fee.

It is offering free legal fees to all new mortgage borrowers who agree to sign up to a new current account.

Source: ' Times '

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