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- Broker suggests other lenders could cut rates due to falling swap rates
Barclays has become the first major lender since early October to announce large-scale cuts to mortgage rates.
The bank says it will reduce rates on several products by up to 0.20 percentage points starting tomorrow.
The changes will benefit people looking to buy, as well as homeowners who need to remortgage.
Barclays’ cut comes against the backdrop of a series of mortgage rate increases in recent weeks by major lenders.
Since the beginning of October, the lowest five-year fixed rate has risen from 3.68 percent to 4.14 percent, while the lowest two-year fixed rate has risen from 4.84 percent to 4.22 percent.
Barclays’ lowest two-year fixed rate for those buying with at least a 40 per cent deposit will be reduced from 4.33 per cent to 4.23 per cent, becoming the second-lowest two-year fixed rate on the market .
Surprise cut: Barclays has become the first major lender to cut its mortgage rates since October
Its five-year low will fall to 4.18 per cent, with a rate of £899. Again this will be one of the cheapest rates on the market.
Homebuyers with deposits of between 5 and 25 per cent will also see some benefit.
Barclays’ lowest five-year fix for someone buying with a 10 per cent deposit will fall to 4.81 per cent tomorrow with a fee of £999. Barclays Premier Bank customers will be able to get a rate of 4.76 per hundred.
Those who buy with a 25 per cent deposit will be able to get a rate of 4.27 per cent with a fee of £899.
On a £200,000 mortgage that would be repaid over 25 years, that would mean paying £1,086 a month.
First-time buyers looking to get on the ladder without a deposit can also take a closer look at Barclays’ Springboard mortgage, which will also see rates fall.
This product requires family and friends to help with the deposit. The helper provides a 10 per cent deposit as security for five years and is placed in a Helpful Home account which earns interest and is returned after five years.
The Barclays Springboard deal, which offers a mortgage covering 100 per cent of the purchase price, will see rates fall from 5.86 per cent to 5.76 per cent tomorrow. There is no fee.
Therefore, someone buying a £200,000 property with this product could expect to pay £1,259 a month from tomorrow, instead of £1,272 at current rates.
Mortgage brokers were surprised by the news given the number of rate hikes in recent weeks.
Justin Moy, CEO of EFH Mortgages, said: “This is a somewhat surprising announcement from Barclays, as the mortgage market showed little room for any type of rate cut before Christmas.
“While these reductions will not be enough to balance the economy, they will be encouraging for borrowers and suggest that improvements may be on the horizon.”
Mike Staton, director of Staton Mortgages, added: ‘Most people assume that a rate increase by a lender is because they fear the current economic situation.
‘With this reduction, Barclays shows that this is not always the case.
‘Barclays has an appetite for loans and wants to finish 2024 on a high. They won’t be the only lenders to cut rates before the end of this year.
Nicholas Mendes, mortgage technical director at John Charcol, believes Barclays has reduced mortgage rates in response to recent market changes.
The price of fixed mortgage rates is often reflected in Sonia swap rates. Simply put, swap rates show what lenders believe the future will hold regarding interest rates.
As of Nov. 22, two-year swaps were at 4.12 percent, trending well below the current base rate but generally in line with equivalent lower two-year fixed-rate mortgage deals.
Five-year swaps had risen above 4 percent in recent weeks but have since retreated. As of November 22, they were at 3.89 percent.
“With swap rates falling in recent days, it’s great to see a lender act quickly to reflect the slight improvement in conditions,” Mendes said.
‘While these reductions won’t change the world, they do offer some respite for borrowers, especially after the recent trend of rising rates among large lenders.
“This could also indicate the possibility of further price swings across the market if conditions remain stable.”