Major high street bank cuts mortgage rates - the first big reductions since October

  • One broker suggests other lenders may cut rates due to falling swap rates

By ED MAGNUS

Updated:

Barclays has become the first major lender since early October to announce large-scale mortgage rate cuts.

The bank says it is reducing rates on a number of products by as much as 0.20 percentage points from tomorrow.

The changes will benefit people looking to buy as well homeowners needing to remortgage.

The cut by Barclays comes against the backdrop of a spate of mortgage rate hikes in recent weeks by major lenders.

Since the start of October, the lowest five-year fixed rate has gone from 3.68 per cent to 4.14 per cent, while the lowest two-year fix has risen from 4.84 per cent to 4.22 per cent.

Barclays lowest two-year fix for those buying with at least a 40 per cent deposit will reduce 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 first major lender since October to cut its mortgage rates

Surprise cut: Barclays has become first major lender since October to cut its mortgage rates

Its lowest five-year will fall to 4.18 per cent, with an £899 fee. Again this will be among the cheapest rates on the market.

Home buyers with deposits of between 5 per cent 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 £999 fee. Barclays Premier banking customers will be able to secure a rate of 4.76 per cent.

Those buying with a 25 per cent deposit will be able to secure a rate of 4.27 per cent with a £899 fee.

On a £200,000 mortgage being repaid over 25 years that would mean paying £1,086 a month.

First-time buyers looking to get on the ladder without a deposit may also look more closely at Barclays' Springboard mortgage, which also will 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 it's placed into a Helpful Start account that 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.

Someone purchasing a £200,000 property with this product could therefore expect to pay £1,259 a month from tomorrow, rather than £1,272 on current rates.

Mortgage brokers were surprised by the news given the number of rate hikes in recent weeks.

What are Barclays' standout rate cuts?

Nicholas Mendes, mortgage technical manager at John Charcol replies:

Some standout reductions include the two-year fixed at 90 per cent loan-to-value (LTV) with no product fee, dropping from 5.49 per cent to 5.39 per cent. 

Similarly, the two-year fixed at 75 per cent LTV with a £899 fee now sits at 4.36 per cent, down from 4.46 per cent. 

On the remortgage side, the five-year fixed at 60 per cent LTV with a £999 fee has seen a notable cut, going from 4.37 per cent to 4.17 per cent. 

Meanwhile, the Great Escape two-year fixed at 60 per cent LTV with no product fee has been reduced from 4.72 per cent to 4.62 per cent. You won't have to pay any application, valuation or standard legal fees on this deal.

Justin Moy, managing director at EFH Mortgages said: 'This is a somewhat surprising announcement from Barclays, as the mortgage market showed little scope for any form of rate cuts before Christmas. 

'Whilst these reductions are not going to be enough to tip the economy back on an even keel, they will be encouraging to borrowers and suggest that improvements may be on the horizon.'

Mike Staton, director at Staton Mortgages added: 'Most people make the assumption that a rate increase by a lender is because they fear the current economic situation.

'Barclays is proving with this reduction that this is not always the case. 

'Barclays have an appetite for lending and want to finish 2024 on a high. They won't be the only lender that reduces rates before the end of this year.'

Nicholas Mendes, mortgage technical manager at John Charcol thinks Barclays cut mortgage rates in response to recent market changes. 

Fixed mortgage rate pricing is often reflected in Sonia swap rates. Put simply, swap rates show what lenders think the future holds concerning interest rates.

As of 22 November two-year swaps were at 4.12 per cent - trending well below the current base rate but broadly in line with the equivalent lowest two-year fixed rate mortgage deals.

Five-year swaps had moved above 4 per cent in recent weeks, but they have since fallen back. As of 22 November they were at 3.89 per cent.

'With swap rates easing over the past couple of days, it's great to see a lender acting quickly to reflect the slightly improving conditions,' said Mendes.

'While these reductions won't change the world, they do offer a bit of breathing space for borrowers, especially after the recent trend of rising rates among high street lenders. 

'This could also signal the potential for more repricing across the market if conditions remain stable.'

How to find a new mortgage

Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible.

Quick mortgage finder links with This is Money's partner L&C

> Mortgage rates calculator

> Find the right mortgage for you 

What if I need to remortgage? 

Borrowers should compare rates, speak to a mortgage broker and be prepared to act.

Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it.

Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees.

Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone. 

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. 

Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people's borrowing ability and buying power.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice.

Interested in seeing today’s best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s online Mortgage Finder. It will search 1,000’s of deals from more than 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C

Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you. 

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage 

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