Some high street mortgage lenders have cut fixed rates this week with Santander and Barclays offering deals at below 4%.
It comes after the Bank of England cut interest rates by 0.25% to 4.5% last week and as swap rates, which lenders use to set their pricing, began improving.
When interest rates are cut, people on tracker mortgages would expect their interest rates to follow suit before long.
However, the move this week to cut fixed-rate deals will come as good news to anyone about to lock into a new mortgage deal.
NatWest was the first lender to announce it would be reducing its rates with cuts of up to 0.36% being made on various deals including remortgages.
Not long after this Santander revealed it would be slashing rates too and, in a competitive move, introducing new two- and five-year fixed rates at 3.99%.
And then Barclays announced it would be introducing lower rates and, with these changes, would also now offer products with rates below 4%. Its new five-year fixed rate for Premier customers who have a minimum of 40% deposit to purchase a home is priced at 3.99%.
Katy Eatenton, mortgage & protection specialist at Lifetime Wealth Management speaking via the Newspage agency described Santander’s first move as a ‘slamdunk’ and a ‘major boost to the property market’.
“Mortgages being sub-4% is a symbolic milestone and will create confidence among prospective buyers and those looking to move home,” she added. “Yes, the rates will only be available to those with bigger deposits or more equity but for mortgages to breach the 4% barrier shows rates are headed in the right direction once again.”
Who will benefit from the price cuts?
Whilst the news of rate cuts have been welcomed by mortgage brokers and experts, there was concern the best rates were currently only available to customers with a large percentage of equity.
Rohit Kohli, director at The Mortgage Stop was also speaking to Newspage. He said: “While it’s encouraging to see lenders passing on lower swap rates, the most significant impact would come from more competitive high LTV deals that help first-time buyers get on the property ladder.
“Until we see movement in that space, many aspiring homeowners will continue to struggle with affordability.”
What else should borrowers consider?
For those who do qualify for the sub-4% rates, however, there is also something to watch out for – namely, fees.
Santander’s 3.99% deals come with hefty fees of £1,999 or £1,749 for the purchase and remortgage options respectively.
David Hollingworth, associate director at L&C Mortgages said: “Borrowers will therefore need to keep their wits about them and do their sums, to make sure that they are getting the best overall value.
“It will be those with large loans that will have the most to gain from the low rate, whereas those with smaller mortgages are likely to be better served by a lower or no fee and slightly higher interest rate.
“Lenders will generally have a range of rate/fee combinations on offer, so borrowers can tailor the deal choice to their own circumstances.”
