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Will the Post Office new mortgage arrangement shake up the market?

The UK Post Office, looking to extend its financial services division, has today launched a new mortgage with a fixed rate of 2.85% for two years. It will now be possible to borrow 65% of the value of your home at the new rate although there is a £1495 arrangement fee to consider. However, the 0.8% reduction in the interest rate charged on a two year fixed term is very competitive and should attract the attention of others in the marketplace.

This comes at a perfect time UK homeowners, and potential homeowners, with recent data suggesting that tracker mortgage rates have indeed increased over last month from 3.54% to 3.56%. Over the same period there has also been a reduction in the number of mortgage products in the marketplace which is a perfect reflection of the lack of competition at the moment. Mortgage lenders are reluctant to commit to long-term deals at this moment in time due to the difficult outlook for the UK economy and the UK property market.

While the Post Office announcement will register with other mortgage providers in the UK whether we see others following suit remains to be seen. At this moment in time the UK government is fighting a losing battle in its quest to improve liquidity in both the business and consumer markets.

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