HBOS cuts mortgage rates

HBOS, Britain's biggest mortgage lender, said it is cutting rates on some of its home loans, the third time it has reduced borrowing costs this month.

HBOS said the rate on some two-year fixed-rate loans would fall to 6.69 percent from 6.99 percent from Saturday, while the rate on larger two-year fixes sold through its Bank of Scotland brand drops to 6.64 percent from 7.09 percent.

The bank is cutting rates on a total of 45 products, it said in a statement.

Mortgage lenders have trimmed mortgage rates this month in response to a decline in the cost of interest rate swaps, used by banks to price fixed-rate mortgages.

That has cut the average rate for two-year fixed loans to 6.98 percent on Friday, down from a ten-year high of 7.08 percent on July 11, according to financial services data company Moneyfacts.

However, mortgage costs remain historically high, having risen sharply in the past year as banks stung by the credit crunch seek to conserve capital and protect profits. The abrupt drying-up of cheap mortgage finance has triggered a slump in house prices, ending a ten-year property boom.

"We need a more prolonged period of rates coming down before we can say we've turned the corner," said Moneyfacts spokeswoman Michelle Slade.

HBOS's latest rate cuts follow similar reductions on Monday by Woolwich, the mortgage arm of Barclays. Lloyds TSB's Cheltenham & Gloucester and mutually owned lender Nationwide both trimmed their rates last week.