Two major high street lenders have announced cuts to their mortgage rates, as they battle for new borrowers in a sluggish housing market.
The mortgage rate war continues to intensify as Barclays and TSB have slashed rates on a range of their mortgage products.
The nation’s biggest banks are now competing to be at the top of the best-buy tables by offering attractive sub-4 per cent mortgage deals, brokers say.
Barclays today announced a wave of changes across its purchase and mortgage products.
Its stand-out deal is a two-year fix for owners with a 60 per cent loan-to-value at 3.84 per cent, down from 3.91 per cent. The changes will be available for borrowers from tomorrow.
It’s the second time this week the bank has announced cuts to its fixed-rate products.
Welcome news: Homeowners and buyers can now get mortgages at less than 4% interest, as lenders compete fiercely to attract new borrowers
TSB has also announced cuts across a selection of its fixed-rate deals by as much as 0.2 percentage points. Its reduced rates are also available tomorrow.
Yesterday, Leeds Building Society yesterday revealed cuts of up to 0.40 percentage points which are available to customers from today.
These most recent cut-price deals follow a slew of reductions in recent days by most of the nation’s biggest lenders including HSBC, NatWest and Nationwide.
Swap rates – which are used by banks to price deals and recue lending risk – have tumbled in recent weeks, which has given banks room to offer more attractive deals.
Justin Moy, managing director at Essex-based EHF Mortgages, says: ‘The sub-4 per cent mortgage race is back on as lenders battle for market share.
‘Competition is seriously heating up as lenders stick their elbows out and look to win business on rates.
‘But as we know, things can turn in the blink of an eye, so borrower beware.’
While some of the cuts over the past week have been small, it is good news for squeezed homeowners who have been plagued with sky-high borrowing costs since late 2022 and will be desperate for their payments to fall.
The swathes of rate reductions are set to boost homeowner confidence as it could slash valuable pounds form their monthly payments.
Plus, the cuts could even spark a return to the market for prospective home buyers and movers – who have been sitting on the sidelines since April’s stamp duty hike.
Droves of homeowners are set to remortgage this year after they roll off their low-rate fixed-term deals that were locked-in some five years ago when rates were far cheaper.
Some 900,000 existing mortgage deals will end before the year is out, according to industry body UK Finance, and plenty of these will need to remortgage.
While rates are likely to be far higher than their previous deals, homeowners will to be grateful for any cuts to their monthly payments.
The average two-year residential fixed mortgage fell from a peak of 6.86 per cent on July 26, 2023, to 5.06 per cent yesterday, according to rate scrutineer Moneyfacts Compare.
The average five-year fix sat at 5.04 per cent yesterday, down from its 6.51 per cent peak on October 20, 2022.
Homeowners will also be anticipating a cut to the Bank of England base rate next month, which currently stands at 4.25 per cent.
Markets are expecting two further cuts to the base rate in 2025, with one as soon as next month, as the BoE tries to combat poor economic growth.
Daniel Hobbs, chief executive at financial advisers New Leaf Distribution, said a rate cut next month could deliver even better news for borrowers.
He said: ‘It feels like things are starting to shift back in favour of borrowers. We’re seeing some decent rate cuts now from major lenders and they’re being announced each day.
‘If the Bank of England delivers some additional relief next month, it could be a busy end to the summer and autumn.’
However, as lenders price expected cuts to the base rate into their products ahead of time, any potential cut will likely be already factored into deals.
Lenders will have this week made rate reductions with this potential base rate cut in mind.
Any cut made by the Monetary Policy Committee is likely to immediately benefit those on tracker or standard variable rate mortgages.
Adam Stiles, managing director at brokers Helix Financial Partners, says: ‘Securing a rate as early as possible is advised, and then making sure you – or your broker if you have one – keep an eye on rates with that lender so you can follow future rate drops down up until completion. In the current market, you need your eyes wide open.’
