UK lender Woolwich cuts mortgage rates

LONDON, July 21 (Reuters) - Woolwich, the mortgage-lending arm of British bank Barclays (BARC.L: Quote, Profile, Research), said it has trimmed its mortgage rates in response to an easing in wholesale borrowing costs.

Woolwich said the rate on popular three-year fixed-rate mortgages will on Tuesday fall to 6.29 percent from 6.49 percent currently, with five-year fixes dropping to 6.29 percent from 6.39 percent.

The biggest reduction is for Woolwich's 10-year loans, where the rate falls to 5.97 percent from 6.29 percent. All changes apply to mortgages of up to 60 percent of the value of the underlying home.

Woolwich said the reductions came in response to a decline in the cost of interest rate swaps, used by banks to price fixed-rate mortgages.

"We have seen an improvement in the swap rates recently and we have taken the opportunity to reduce our longer-term fixed rates where we see customers can get the best value at the moment," Woolwich Head of Mortgages Andy Gray said in a statement.

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 UK house prices, ending a 10-year property boom.

Woolwich accounted for 28 percent of all net new lending in the UK during the first three months of 2008, up from 8 percent a year earlier, a Barclays spokesperson said.

Woolwich's rate cuts follow similar moves last week by mutually-owned lender Nationwide and Cheltenham & Gloucester, part of British bank Lloyds TSB (LLOY.L: Quote, Profile, Research). (Reporting by Myles Neligan; editing by Tony Austin)