Fixed rate mortgages have fallen again this week, offering some relief to people looking to buy or remortgage.
Barclays and Skipton Building Society have both announced rate cuts that will take effect from tomorrow.
Barclays is cutting mortgage rates across more than 20 products and by as much as 0.36 percentage points, creating some new best buys.
For those buying with a 40 per cent deposit or more, Barclays is lowering its two-year fix from 4.95 per cent to a market-leading 4.6 per cent. It comes with a £899 fee.
On a £200,000 mortgage being repaid over 25 years, that’s the difference between paying £1,163 and £1,123 a month.
Those buying with a 25 per cent deposit will also be able to get a 4.74 per cent rate, also a best buy.
Pressure easing: The lowest two-year fix is now 4.6% for most borrowers
The high street bank is also improving rates for households remortgaging. Its lowest two-year fix will fall to 4.83 per cent.
Skipton Building Society’s rate reductions are across two and five-year fixes as well as two‑year buy‑to‑let products.
Its rates will fall by an average of 0.07 percentage points with the largest cut being 0.27 percentage points.
The changes by Barclays and Skipton follow in the wake of Halifax and HSBC, which cut mortgage rates on Friday and Natwest, which made cuts effective today.
For those buying with a 40 per cent deposit or more, Halifax is offering two-year fixes from 4.64 per cent. Its sister bank, Lloyds Bank has a 4.55 per cent two-year fix – though this is only available to Club Lloyds current account holders.
Lloyds Bank also has a five-year fix for Club Lloyds current account holders at 4.68 per cent while Skipton has a 4.74 per cent five-year fix.
For those prepared to take more of a risk, Halifax still has its 3.96 per cent two-year tracker for those buying with a 40 per cent deposit.
Tracker mortgages follow the Bank of England base rate, plus a certain percentage on top. If the base rate goes up, so does the tracker rate, and vice versa if it goes down.
The direction of interest rate travel is up in the air at the moment due to the Iran war.
Why are mortgage rates falling?
Mortgage rates have been falling amid an easing of the tension and conflict in the Middle East.
Fixed rate mortgage pricing is largely based on Sonia swap rates – the inter-bank lending rate, which is based on future interest rate expectations.
When Sonia swaps rise sufficiently it often results in fixed mortgage rates going up, and vice versa when they fall.
Similar to gilt yields, Sonia swap spiked upwards last month. Two-year swaps went above 4.5 per cent, having been 3.36 per cent on 27 February. However, they have now settled back down to around 4 per cent.
Mortgage help: David Hollingworth, associate director at L&C Mortgages
‘As the conflict in the Middle East has eased so too have swap rates, a key indicator for fixed rate mortgages,’ said David Hollingworth, associate director at L&C Mortgages.
‘Lenders that had initially priced up to avoid more spikes in volume from borrowers rushing to grab the lowest rates have also been able to regroup and reassess how competitive they can be.
‘That’s increasingly seeing more meaningful improvements that are driving the market lower.
‘The more stable market rates are giving lenders the chance to price more competitively, although fixed rates remain substantially higher than they were at the end of February.’
Hollingworth is hopeful that the rate cutting will continue, however thinks there is still a danger of a return to volatility with such an uncertain backdrop.
He therefore advises borrowers ‘to hope for the best and plan for the worst.’
He added: ‘Holding off from securing a fixed rate in the hope of further improvements could backfire if markets turn again.
‘Locking in a rate now still gives the flexibility to review again before completion if rates continue to improve, but will protect against a hike in rates if the situation were to worsen again.’
Borrowers can usually agree a new mortgage six months before their old one expires, and can opt for a new rate until shortly before it starts.