MORE major lenders have revealed “very significant” cuts to mortgage rates following hot on the heels of several big banks.
Barclays and Santander are the latest to reveal a drop in the cost of borrowing easing the pain for homeowners and first-time buyers.
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Mortgage rates have shot up as the Bank of England has hiked the base rate several times in a bid to tackle inflation.
The BoE base rate is used by banks to set interest rates for borrowing, including mortgages.
It stood at 0.1% in December 2021 but is now at 5.25%.
Millions of homeowners have faced higher rates after coming off deals they initially fixed when rates were low, and first-time buyers have found it harder to get on the property ladder
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But the base rate has stayed the same in recent months, as inflation has eased, and experts predict it could now start to fall this year.
That’s prompted lenders to cut mortgage rates with a flurry of the biggest banks starting the year by announcing rate reductions.
Now Barclays has joined the ranks, slashing rates by up to 0.5%.
A two-year fix with a 75% loan-to-value ratio (LTV) will fall from 4.7% to 4.2% from tomorrow (January 10).
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With an LTV of 60%, it will fall from 4.62% to 4.17%. The loan for both LTVs has a product fee of £899.
The bank’s Mortgage Guarantee Scheme two-year fix will also be reduced from 5.8% to 5.5%.
This type of mortgage is for those with a small deposit as it lets you borrow with an LTV of 95%.
Justin Moy, managing director at EHF Mortgages, said: “These are significant rate cuts by Barclays, both for those looking to buy with small and larger deposits.
“These will definitely be attractive to first-time buyers looking to take advantage of improving market conditions.
“The January mortgage fire sale is firmly underway.”
Santander has also announced rate cuts of between 0.17% and 0.82%, including a five-year fix under 4%.
It’s offering 3.89% on a loan with a 60% LTV when remortgaging, and 3.94% with the same LTV for purchases. Both have a £999 product fee.
Graham Sellar, head of business development for mortgages at Santander, said: “We are delighted to help borrowers access cheaper loans with major reductions across our fixed mortgage rates.
“From tomorrow customers can apply for our latest deals through their mortgage broker or directly with us on the Santander website or over phone.”
The bank’s New Build mortgage rates will be reduced from 0.21% and 0.56%.
For those already with the bank, fixed rates will fall by between 0.04% and 0.82%.
Darryl Dhoffer, from the Mortgage Expert, said: “Santander, notorious for keeping its rates high and late to the interest rate reduction party, unleashes a left hook of a 5-year fixed deal at 60% LTV and is leading the market for remortgage and purchase.”
The exact rates you get can depend on a range of factors though, including your income, amount you borrow and your credit score among other things.
Competition is hotting up in the mortgage market as lenders compete for customers.
A wave of rate drops kicked off the year bringing good news for homeowners and first-time buyers who have been pummelled by rising interest rates.
Halifax, the UK’s biggest mortgage lender, along with Natwest, HSBC, First Direct, Leeds Building Society, Gen H, slashed rates last week, and Co-op making a similar move on Monday.
Data released yesterday found that the number of mortgage products on the market hit a 15-year high.
Along with better rates, which mean lower monthly repayments, it means borrowers have more choice.
Michelle Lawson, director of Lawson Financial, said: “Lenders are coming into 2024 strongly as expected. Expect more falls to come as stability returns.
“This will hopefully further stimulate competition in the mortgage market, which in turn will boost the property market.”
But there’s no guarantee lower rates will stick around – though no one can predict what will happen in the mortgage market.
Alex Hasty, director at Compare the Market, said: “Homeowners will be pleased to see some lenders cut fixed rate mortgages over the past few weeks, one high-street bank made reductions of up to 0.5%.
“Customers may now be able to secure rates below 4%. Those looking to move home or remortgage can consider taking advantage of this. However, whether this is a long-term trend remains to be seen.
“With the UK’s inflation and interest rate trajectory still uncertain, we could see continued volatility in the rates that providers are able to offer to new and existing customers.
“For those looking to move home or remortgage, comparing available deals now and staying aware of what is happening in the market could help you prepare and save for the future.”
How to get the best mortgage deal
Getting the best rate on your mortgage can depend on the rates available at the time.
Unfortunately there’s no way to predict what will happen to rates, and whether they will go up or down in future. But there are several ways to land the best deal available for you.
Many wait until their existing loan has run its course before signing up to a new offer.
But if you’re nearing the end of a fixed deal it’s worth looking now as you can lock in current deals sometimes up to six months before your current one ends.
You’re not locked in though, so if you find a better deal you can always cancel and get the new one – and you can do that as many times as you want.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio has changed this could also give you access to better rates than before.
A change to your credit score or a better salary could also help you access better rates.
If you’re on a standard variable rate (SVR) fixed and tracker deals are likely to be cheaper, so it’s worth looking at what’s out there.
You usually end up on an SVR if your fixed deal ends and you don’t choose a new one.
These can be over 8% and are among the most expensive options out there.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare for you, but you may have to pay for this service.
It could cost a couple of hundred pounds but it might save you thousands on your mortgage overall.
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You’ll also need to factor in fees for the mortgage, though some have no fees at all.
Or you can add it to the cost of the mortgage, but beware that means you’ll pay interest on it and so will cost more in the long term.
