MORTGAGE interest rates dropped to their lowest level ever in February, new figures showed yesterday, six months after the Bank of England started offering banks cheap funding in an effort to boost lending to the private sector.
The average five-year fixed mortgage costs just 4.14 per cent, according to finance research site MoneyFacts.
That is down half a percentage point from 4.64 per cent a year ago and represents an enormous plunge from 5.41 per cent in the same month of 2011.
The Bank of England’s Funding for Lending scheme (FLS) has allowed banks to draw down billions of pounds in cheap funding since August, pushing down rates.
But even banks which are not taking state funding have increased lending.
HSBC, the largest bank not taking part in the FLS, published healthy lending data yesterday.
The banking giant’s gross new mortgage lending jumped 24 per cent to £16.4bn in 2012, while it approved £5bn for first time buyers, an increase of 32 per cent on the year.
And its gross new business lending increased two per cent to £30.4bn.
But figures across the whole industry were not uniformly positive for borrowers – despite the falling interest rates, mortgage lending fell in January according to the Council of Mortgage Lenders.
Gross home lending in the month came in at £10.4bn, down nine per cent on December’s figure and three per cent on the year.
Analysts blamed cold weather for the fall, and remain upbeat about the market’s prospects.