Mortgage worth conflict heats up: Could charges drop beneath 3.5% by Christmas?
- Bank of England is expected to cut interest rates from 4% to 3.75% next week
Major lenders have cut their mortgage rates with brokers now expecting the best deals to edge below 3.5 per cent in January.
Over the past month, those looking to buy a home or remortgage will have noticed rates improving.
Major high street banks, including Barclays, Nationwide, Santander and NatWest have all made changes recently.
This week, Santander launched a 3.51 per cent two-year deal, the cheapest on the market.
It is available to home movers buying with at least a 40 per cent deposit and requiring a mortgage of £500,000 or more. The deal also comes with a chunky £1,999 fee.
On a £500,000 mortgage being repaid over 25 years, this deal would cost £2,507 a month.
Best-buy: Santander currently offers the lowest two-year fix on the market – but only for those needing loans of £500,000 or more
For smaller mortgages, Santander is offering a two-year fix at 3.55 per cent, with a £999 fee.
Nationwide lowered its rates last week and has a 3.58 per cent two-year fix with a £1,499 fee for mortgages between £300,000 and £5 million. For smaller mortgages it offers 3.63 per cent and a £999 fee.
Barclays also lowered its rates in recent days and is offering a 3.63 per cent two-year fix with £899 to pay in fees.
Households in the process of remortgaging their current deal can secure two-year rates as low as 3.69 per cent.
Those fixing for five years will see rates start from 3.76 per cent for both home movers and households remortgaging.
Mortgage brokers say the rate cuts are being driven by lender expectations of a 0.25 percentage point base rate reduction on 18 December which would see interest rates fall from 4 per cent to 3.75 per cent.
Ben Perks, managing director at Orchard Financial Advisers said: ‘I think we’ll see a sub 3.5 per cent rate before the year is out.
‘Lenders are starting to jostle for position and with a base rate reduction very likely, the possibility of better rates is high as the price war rages.’
Some brokers also say the low levels of lending activity in the months leading up to the Budget mean many banks and building societies have not met their targets, meaning they are keen to reel in new customers.
‘Data from the Bank of England shows that fell in October, remortgage approvals hit their lowest level since February and net mortgage borrowing dropped massively, too,’ said Nick Gatti, mortgage adviser at NG Mortgages.
‘This all means less demand and so lenders need to be more competitive to hit their targets.’
