Barclays has launched the UK’s cheapest mortgage at 3.84 percent as banks and building societies battle to attract homebuyers.
Further cuts are expected in the coming days which are predicted to trigger a rush to buy through the rest of this year.
Nationwide and the NatWest were the first to cut the rates on fixed rate deals to under 4 percent, to be followed by HSBC and now Barclays.
Barclays is introducing a raft of cheaper deals with, for example, the figure on its five-year fix, based on a 60 percent loan to value, coming down from 4.04 percent to 3.84 percent. It carries a fee of £899.
The reductions come after the Bank of England’s decision to cut the base rate by a quarter point to 5 percent. At the same time, so-called swap rates, which set the interest rates financial institutions charge each other to borrow have been falling.
Stephen Perkins, Managing Director at Yellow Brick Mortgages, told Newspage the deal from the bank “represents a real statement of intent”.
He said: “It’s game on in the mortgage market now. More lenders going sub-4 percent is greatly welcomed.”
At the moment the best deals are only available to those with a large deposit, however he said there is good reason to believe that these competitive rates will filter up the loan-to-value brackets to help more borrowers.
Ranald Mitchell, Director at Charwin Mortgages, said other lenders will be under pressure to cut home loan rates.
“Barclays’ move to cut mortgage rates to sub-4 percent is a breath of fresh air for borrowers and a welcome boost for the property market. This bold step is sure to ignite interest among prospective buyers who have been sitting on the fence, waiting for better rates,” he said.
“With Barclays setting the pace, other lenders will now feel the heat to follow suit, cranking up the competition. It looks like mortgage product teams across the industry might have to swap their summer holidays for strategy sessions. This is a win for consumers and a lively shake-up for the market.”
Riz Malik, Director at R3 Mortgages, predicted more rate reductions, saying: “This post-base rate cut bonanza from Barclays will help drive confidence among borrowers and in the UK housing market. These are some decent cuts but they probably won’t be the last.”
Ben Perks, Managing Director at Orchard Financial Advisers, told Newspage it is important lenders have systems in place to cope with a rush of applications.
“Barclays have breached the 4 percent barrier and it’s bloody brilliant to see,” he said.
“But now that they are armed with attractive lower rates, will their servicing be up to the task? Either way, the sub-4 percent competition is hotting up and, as other lenders join the fray, borrowers will start to rejoice.”
The deals are good news for first time buyers, however people who are remortgaging now and in the coming months will still be paying more than on mega low fixed rate deals charging around 2.5 percent that were taken out two years ago.
Emma Jones, Managing Director at Whenthebanksaysno.co.uk, said: “This is the news borrowers have been waiting for. More lenders going 4% is symbolic and generates real confidence among borrowers.
“This is another step in the right direction for rates and suggests we are going to see a lot more activity during the rest of 2024. Let’s hope rates get more competitive at higher LTVs.”
Darryl Dhoffer, Mortgage Broker at The Mortgage Expert, urged lenders to make sure the cheapest rates are available to those with small deposits.
“Ignoring the consumer with low deposits could stump the market further down the line,” he said.
Rohit Kohli, Director at The Mortgage Stop, confirmed these concerns, saying: “We still need to see more savings passed onto those with lower deposits, particularly people trying to get onto the property ladder with 5 percent or 10 percent deposits.”
Simon Bridgland, Director at Release Freedom, welcomed the competition between lenders.
“This is the point in the week when all the big guns of the mortgage lending world grit their teeth and snarl at one another, all vying for top spot with sub-4 percent,’ he said.
“Who will come out on top by the end of the week could be a surprise, as good deals usually creep out amongst other smaller lenders as the week progresses.”
