Barclays has reduced several of its most important mortgage rates as brokers expect increased competition from high street banks to offer lower prices in anticipation of an anticipated interest rate reduction this summer.
The high street bank announced on Monday that it will reduce rates for some of its mortgage fixed rate deals over two and five years, including its 60 percent loan-to value rate on two-year terms from 5.1% to 4.9%.
Nicholas Mendes is the mortgage technical manager of broker John Charcol. He said that more banks are likely to improve their offerings in an effort to remain competitive.
The Conservatives could claim that a drop in borrowing costs before the general elections on July 4 is proof of Prime Minister Rishi Sunder’s economic plan working in the last days of their campaign.
Barclays informed brokers that it will be changing rates for a number of products in its residential range starting Tuesday.
Mpowered, a lender, announced that it would make similar cuts. It will reduce its 60 percent loan-to-value ratio for two years to 4.76 percent, down from 4.87 percent.
Mortgage costs have risen sharply in the last two years and are affecting household finances, making it harder for people to purchase homes.
Moneyfacts reports that the average rate for a two-year fixed contract has risen from 3.25 percent in June 2022, to 5.96 percent at present.
Labour Party has accused Liz Truss’s Conservative Government of causing the mortgage rates to spike after the “mini” Budget for autumn 2022.
Last week, the Bank of England held its interest rates at a record high of 5,25 percent. Traders had priced in a rate cut announcement for August. Mortgage lenders could move ahead, taking advantage of a drop in swap rates which underpin mortgage pricing.
The Sonia swap rate for five-year loans that UK lenders use to price their loans has dropped to 3.82 percent from 3.93 percent a month earlier.
Matt Smith, mortgage specialist at Rightmove online property portal, said that the latest BoE’s decision to maintain the base rate in line with expectations has brought “certainty to the market.”
He said that this could result in mortgage rates “trickling downwards rather than rising over the next couple of weeks, which is what home-movers really want”.
Lenders face pressure to stay competitive in order to compete for a pool borrowers who have seen their budgets squeezed due rising borrowing and living costs.
Knight Frank Finance partner Hina Bhudia said that Barclays’s cut was due to “increasing competition for buying activity which has so far fallen short of expectations”.
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