'More cheap mortgages on the way'

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UK mortgage interest rates - already at record lows - have fallen in the first half of the year and "show no signs of stopping", according to Moneyfacts.

The financial information service said the cost of all types of fixed rate mortgage had dropped on average since January.

It said the lower costs were driven by competition.

Even though loan costs have fallen, many potential first-time buyers still struggle to raise the funds required.

Government figures released last week show that the number of first-time buyers in England has fallen by a third in the past decade.

A report from UK's largest mortgage lender the Halifax, published on Saturday, shows that house prices are on average 12.5 times local earnings in the most unaffordable area of the country for property - Brent, in north London.

The Halifax data also shows that first-time buyers face the highest prices in London, paying £384,000 on average, compared to just £110,00 in Northern Ireland.

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'Fierce competition'

Once on the ladder, homeowners are seeing historically low costs for home loans.

Moneyfacts said that those looking for a mortgage now would be substantially better off than they would have been had they looked six months ago.

For example, a borrower with a £200,000, average five-year, fixed rate, 25-year repayment mortgage would pay £240 less now than if they had taken the same mortgage in January.

Average rates for two-year, five-year and 10-year deals have all fallen since the start of the year, with the most common two-year terms now recording an average rate of 2.52%.

Average mortgage rates fall
Mortgage January 2016 July 2016
Two-year fixed rate 2.76% 2.52%
Five-year fixed rate 3.29% 3.1%
10-year fixed rate 3.63% 3.43%
Source: Moneyfacts

"With competition still fierce in the market it is little surprise that mortgage rates have fallen in the first half of 2016, reaching record lows yet again and currently showing no signs of stopping," said Charlotte Nelson, at Moneyfacts.

"While the economy may have faced some uncertainty after the EU referendum one thing is for certain: mortgage competition is currently here to stay."

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