A number of mortgage lenders are cutting rates following the Bank of England’s decision last Thursday to maintain interest rates at 5.25 per cent .
This week, Barclays is cutting rates on three of its fixed-rate mortgage deals, spelling brighter news for some borrowers.
Its cutting one of its two-year fixed deals from 5.76 per cent to 5.48 per cent while the another is being reduced from 5.13 per cent to 4.88 per cent. It is also cutting its five year fixed deal from 4.9 per cent to 4.85 per cent.
Smaller lender MPowered Mortgages has also revealed it has cut rates on a number of its fixed-rate mortgage deals in response to last week’s interest rate decision.
It is offering a two-year fixed rate deal to 4.76 per cent, down from 4.87 per cent, for those paying a £999 fee. Alternatively, for those not wanting to pay an arrangement fee, rates start from 4.99 per cent, down from 5.9 per cent.
All five-year fixed rates at MPowered Mortgages have also been cut for those with a deposit or equity of 25 per cent or more.
A number of other providers, including Kensington and Virgin Money, have also reduced rates on certain fixed-rate mortgage deals since last Thursday’s vote on interest rates.
On 20 June, the Bank of England’s Monetary Policy Committee (MPC), led by Andrew Bailey, voted 7-2 to keep interest rates on hold. The MPC’s next interest rates vote is in August, with many analysts anticipating a reduction in the base rate amid falling inflation.
Speaking to i, Rachel Springall, a finance expert at Moneyfacts, said: “It’s good to see some lenders reducing their fixed-mortgage pricing, so it’s worthwhile for borrowers to review the latest deals out there so they don’t miss out.”
Mark Harris, chief executive of SPF Private Clients, told i he believes more lenders may follow suit and start to reduce interest rates on some of their fixed rate deals.
He said: “If Swap rates continue to gently float downwards, we would expect other lenders to reprice downwards. As confidence grows that the MPC will reduce base rate, borrowers are likely to see more dramatic reductions based on this.”
Swap rates are based on long-term predictions for where the Bank of England interest rate – the interest the Bank charges on its lending to commercial banks – will go in the future.
He added: “However, it is still open to discussion whether we will see an August cut and the mantra of ‘higher for longer’ has meant fixed-rate mortgage pricing is currently higher than many forecast earlier in the year. Borrowers can’t take anything for granted, and if they see a rate they like the look of, they would be wise to secure it.”
Springall added that it may be some time before all lenders make moves to cut their rates.
“Borrowers will likely wish to see more lenders step up to slash fixed rates, but it might be too soon to see a flood of rate cuts. It can take a couple of weeks for lenders to price in swap rate volatility, so borrowers may have to be patient.
“Even if there are growing expectations for the Bank of England to cut base rate in August, some of the biggest lenders may hold tight on making notable cuts in anticipation until their peers make a move.”
While some borrowers will benefit from lower rates on mortgages, the picture can be more complex for existing borrowers or those remortgaging.
Justin Moy, managing director of EHF Mortgages, said: “Barclays have made a positive start this week [by] passing on swap rate improvements to those looking to buy a new home.
“With cuts across their purchase range, it is likely that other lenders will follow a similar pattern. But keeping remortgage or existing borrowers paying higher rates won’t please the majority of borrowers.”
