Four major banks have reduced the interest rates on their mortgage offerings to kick off the new year. The Bank of England had previously cut the base rate from 4% to 3.75% in December, benefiting many mortgage holders. Numerous lenders have followed suit by lowering their mortgage rates.
Lloyds Bank is now providing the most competitive homebuyer mortgage option in the market at 3.47% for Club Lloyd customers, fixed for two years, and available to those with a 40% deposit, with a £999 fee. Halifax is offering a two-year fixed rate mortgage at 3.74%.
Barclays has introduced a two-year fixed rate mortgage at 3.57% with an £899 product fee for customers with a 40% deposit. Additionally, there is a 3.78% two-year fix for individuals remortgaging with 25% equity in their home, which includes a £999 product fee.
HSBC presents a 3.78% deal with a £1,008 fee and a 3.56% two-year fix with a £999 product fee for customers with a 40% deposit. According to Moneyfacts, the average two-year fixed residential mortgage rate currently stands at 4.80%.
David Fell, lead analyst at Hamptons, noted that the decrease in mortgage rates is enticing more buyers back into the housing market, particularly those who had held off during rate peaks. The drop in rates below 3.5% early in the year is prompting potential sellers to reconsider their options due to the reduced monthly cost of a new home. Fell also mentioned the possibility of further rate reductions this year if inflation surprises on the downside.
For individuals with tracker mortgages, their deals and repayments align with the Bank of England base rate, typically tracking slightly above it. Standard variable rate (SVR) mortgages can change at any time, usually moving in line with the base rate. SVRs are generally more expensive. Fixed-rate mortgages involve paying a set amount each month for a specific period, after which borrowers are usually transferred to the lender’s SVR. Mortgage holders nearing the end of their deal should compare rates, consult a mortgage broker, and consider switching to a new deal in advance to potentially secure a lower rate.
Lenders generally allow borrowers to secure a new deal about three months before the current one ends. If rates decrease, borrowers may have the option to switch to a cheaper deal, but it is advisable to check for any associated fees with the lender first.