Legal & General: Falling fixed rates not benefiting everyone

Date:Thursday 8th January 2009
Author: Rachel Fletcher

Reductions in fixed rates on mortgages are being restricted to borrowers designated as low-risk, Legal & General has claimed.

In a report on the fourth quarter of 2008, the lender found that the average fixed rate for a two-year mortgage deal was 5.90 per cent, down from 6.38 per cent in the previous quarter.

For three-year fixed-rate deals in the same period, the average rate went from 7.41 per cent to 6.30 per cent.

But Stephen Smith, Legal & General's director of housing, said that this probably demonstrated a fall in rates for "low-risk" customers, as the average loan-to-value (LTV) for residential mortgages is approximately 60 per cent.

He added that only low-risk borrowers have a competitive market and said that borrowers needing higher LTVs "have been shut out for now".

Meanwhile, the Association of Mortgage Intermediaries (AMI) has called on the government not to neglect the issue of liquidity needed in the mortgage market as the monetary policy committee meets to discuss the base rate.

AMI director Robert Sinclair said that bringing more liquidity to the market was more important than a base rate cut, which he said would be detrimental to savers.