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Mortgage rates start to fall as prices plunge

Mortgage rates have begun to drop in the face of the biggest housing price fall since 1983, according to the Halifax.

Its house price index shows the average rate on outstanding mortgage loans fell by 21 basis points in the first half of this year from 5.97 per cent in December 2007 to 5.76 per cent in June.

Halifax says the average UK house price has fallen by 11 per cent drop since July 2007 – the biggest year-on-year dip since 1983. Prices fell by an average of 1.7 per cent in July.

It says mortgage rates have declined despite a rise in the average mortgage rate paid by new borrowers from 5.77 per cent in April to 5.91 per cent in June. It attributes the overall rate drop to earlier reductions in Bank of England base rate.

Halifax economist Suren Thiru says: “Pressure on householders’ income is constraining potential housebuyers’ ability to enter the market which is resulting in both lower prices and activity levels.”

London & Country’s mortgage expert David Hollingworth says: “There is some competition now, which is rem- arkable, but just as things get on an even keel something can come along and spoil it all.”

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