Barclays, Santander and HSBC have all announced reductions in their mortgage rates. This is a further step towards lower UK home loan rates following the HSBC and Halifax rate cuts last week.
Santander announced a deal with rates below 4% for new and existing customers who have a minimum deposit of 40% on a fixed-rate mortgage over five years. Santander said that its fixed residential rates will fall up to 0.82 percent points starting Wednesday.
Barclays is offering a fixed rate of 4.17 percent for two years, down from the previous 4.62 percent, to borrowers who have a 40% deposit. Rates will drop by as much as 0.5 percentage points in its residential range. It will also offer those with less than a 25% deposit a rate of 4.2% for two years, down from 4.7%.
The Co-operative Bank cut rates by over one percentage point on some deals. Customers who are looking to remortgage their homes can now get a deal starting at 3.85%, and a five-year deal starts at 3.744%. New customers can get the same rates at 4.22 percent and 3.84 percent.
These changes come after HSBC, Halifax & Leeds Building Society announced rate reductions across their residential ranges last week.
Competition between lenders has intensified in recent weeks, resulting in a drop of mortgage rates. These latest reductions follow on from a fall in swap rates that occurred in December after investors forecasted a faster pace of inflation and Bank of England rates falling in the next year. Lenders use swap rate to determine the price of fixed-rate mortgages.
Adrian Anderson, Director at Anderson Harris Brokerage, stated: “The market predicts that the base rates might drop faster than what the Bank of England suggests. . . “Over the short-term, I believe we will continue to see a decrease in fixed-term prices from lenders.”
Last week, two clients called to ask about a temporary remortgage to a variable-rate deal with the hope that they would be able to lock in a lower rate later. They were hesitant when they saw the variable rates.
Anderson stated that “many people took variable trackers last year in the hopes of fixed rates starting to drop, and they now have.” “I do believe we are at the point where switching from tracker margins to fixed rates is a good idea. “The fix is much cheaper than variable rates.”
The mortgage rates have dropped in recent weeks but remain above what was offered before the “mini-budget” of September 2022. Moneyfacts reports that the average two-year fixed rate is currently 5.81 percent, down from 6.86 percent last summer. However, it was 4.7 percent on the eve before the “mini” Budget.
Aaron Strutt is a director of Trinity Finance. He said that the swap rates, which indicate the cost to banks and building societies for funding mortgages, was one reason behind the rate reductions. He said that the lenders knew the only way to revive the market and boost the lending figures from last year was to offer lower rates.
This is a sign of the extent to which investors expect base rates to fall over the next few years. The two-year swap rate has fallen from 4.2 percent in December, and now stands at 4.2 percent. Investors expect rates to drop in the future.
Some brokers wondered how long mortgage rates and swap rates would continue to fall, given that they were so far off from the base rate. Anderson stated: “The Bank of England may not start reducing its base rate until spring.”
Chris Sykes of mortgage broker Private Finance said that a number lenders have yet to lower rates. Therefore, there are likely to be more cuts in the future, but they will not be “dramatic”. He said that some of the rates offered during the most recent round of rate cuts were lower than the relevant swap rate. This is a very unusual situation for lenders. This is extremely rare and we do not expect to see these rates for very long.