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Mortgage price war ignites as loan rates drop to a record low of 0.83%

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The mortgage price war flared up in the summer with two-year fixed interest rates dropping to a record low of 0.83 percent.

Mortgage rates are falling as lenders have to fight harder for borrowers as the stamp duty holiday ends.

But while experts expect more cuts to come, they caution that the price war is unlikely to final lengthy.

The unused deal from Halifax, which will be available to buyers with a 40 percent deposit starting Monday, is the lowest two-year deal ever.

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It was revealed as house prices rose again in July despite the government stamp duty holiday tapering off. The average home value in the UK is now £261,221 following prices rose 0.4 per cent final month compared to June, according to the Halifax Home Price Index.

The Halifax deal comes just weeks following Nationwide launched its first five-year rate of just under 1 per cent. For a typical £200,000 home loan, the monthly installments with the Halifax deal would be up to £738. There is a fee of £1,499 and the loan must be taken through an intermediary.

Halifax also launched a two-year repair at 0.87 per cent with a fee of £999, which could be cheaper for borrowers taking on smaller loans.

“The unused rates from Halifax are very low. I’ve never seen anything like this prior,” said Louis Shaw, broker Shaw Financial Services.

Doug Miller, of Lansdown Financial Services said: “The market has become very competitive. But like all pleasing things, this will soon be over. The rise in house prices has been most pronounced in Wales, which has seen a boom in buying activity during the pandemic. Prices have jumped at the fastest rate. Annually since 2005, a home now costs an average of 13.8 percent more than it did a year ago.

But across the UK as a whole, there were signs that the fiery property market was starting to cool down. Prices are up 7.6 percent on average from July final year — the slowest annual growth rate since March, when the winter shutdown was about to end.

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It rose 0.4 percent month-on-month, only partially recovering from the ground it lost in June, when prices slipped 0.6 percent from an all-time lofty in May.

A divide index from Nationwide indicated final week that prices fell 0.5 percent between June and July.

But Lucy Pendleton, of real estate broker James Pendleton, said: “The housing market is flat, not peaking, and London is getting its magic back as the country returns to average. The weak annual growth rate is simply a symptom of pressure on buyers a little bit. There is no longer a Reason to compromise the price for the sake of speed.

Chancellor Rishi Sunak introduced a stamp duty holiday during the pandemic final year in a bid to move the housing market following the first shutdown.

It originally meant that buyers had no tax to pay on their first £500,000 of property purchases. But since the start of July, that limit has been lowered to £250,000.

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