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Barclays and Santander have announced cuts to their mortgage rates, adding to momentum for cheaper UK home loan deals after HSBC and Halifax reduced rates last week.
Santander led its announcement with a sub-4 per cent deal available to new and existing customers with a deposit of at least 40 per cent on a five-year fixed rate mortgage. It said its residential fixed rates would fall by up to 0.82 percentage points from Wednesday.
Barclays will from Wednesday offer a two-year fix at 4.17 per cent, down from 4.62 per cent, for borrowers with a 40 per cent deposit. Its rates will fall by up to 0.5 percentage points across its residential range, and it will offer those with a smaller 25 per cent deposit a two-year rate of 4.2 per cent, down from 4.7 per cent.
The Co-operative Bank slashed rates on Tuesday by more than one percentage point for some deals. Existing customers looking to remortgage can now access a two-year fix starting from 3.85 per cent, while five-year deals start at 3.74 per cent. For new customers the equivalent rates are 4.22 per cent and 3.84 per cent respectively.
The changes follow rate cuts announced last week by HSBC, Halifax and Leeds Building Society across their residential ranges.
Mortgage rates have been falling for several weeks as competition between lenders intensifies. The latest cuts follow a drop in market swap rates in December, after investors predicted a quickening pace of falls in inflation and Bank of England interest rates over the coming year. Lenders use swap rates to guide their pricing of fixed-rate mortgages.
Adrian Anderson, director at broker Anderson Harris, said: “The market is predicting that the base rate might come down quicker than the Bank of England is suggesting . . . Over the short term, I think we’re going to continue to see a reduction in fixed-term pricing from lenders.”
Two clients called him last week to discuss remortgaging temporarily to a variable rate deal in the expectation they could lock in to a lower fixed rate later. But on seeing the higher rates on variable deals, they demurred.
“A lot of people last year took variable trackers in the hope that fixed rates will start to come down and now they have,” Anderson said. “So I do think we’re at that point where it could be the time to switch from tracker margin to a fixed rate. The fix is so much cheaper than variables.”
Mortgage rates may have fallen in recent weeks, but they remain well above the levels on offer before the “mini” Budget of September 2022. Average two-year fixed rates are currently 5.81 per cent, down from a high of 6.86 per cent last summer, according to finance site Moneyfacts, but were at 4.7 per cent on the eve of the “mini” Budget.
Aaron Strutt, a director at broker Trinity Finance, said one factor behind the rate cuts was the falling cost of funding mortgages for banks and building societies, as indicated by swap rates. “The lenders know the only way to get the markets moving again and to boost some of the low lending figures they had last year is to issue cheaper rates,” he said.