Major excessive road financial institution cuts mortgage charges – the primary large reductions since October

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

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.

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.’