Homeowners in the UK are facing a golden opportunity to secure low-cost mortgage deals as rates hit their lowest levels in two years.
Major lenders are engaged in fierce competition, driving down prices for borrowers.
Barclays has announced a new five-year fixed rate at 3.71 per cent for those buying homes with a 40 per cent deposit, closely following Nationwide’s 3.74 per cent deal.
These rates haven’t been this low since September 2022, just before Liz Truss’s mini-Budget.
Experts suggest now may be the perfect time to lock in a mortgage, as rates could potentially rise after Labour’s first Budget.
Chris Sykes, a mortgage broker at Private Finance, expressed surprise at how low rates have fallen, noting that banks’ profit margins on the best deals are likely “wafer thin”.
UK inflation has fallen to the lowest level in two years sparking homeowners to wonder what it could mean for mortgage rates GETTYNatWest, Halifax, and Nationwide for Intermediaries have also announced cheaper mortgage rates.
Nationwide has launched a 3.89 per cent two-year fix with a £1,499 fee, undercutting Santander’s sub- four per cent offer.
This rate is available for mortgages between £300,000 and £5million, requiring a 40 per cent deposit.
Three-year fixed rates are becoming more affordable, with Barclays, MPowered Mortgages, Santander, and Nationwide offering sub- four per cent rates for borrowers with 40 per cent deposits.
For five-year fixes, Barclays has introduced a 3.70 per cent rate for higher earners with a 40 per cent deposit and an £899 fee.
This beats NatWest’s and Nationwide’s new five-year fixes priced just below 3.75 per cent, both available to property purchasers with a 40 per cent deposit and fees around £1,500.
Aaron Strutt, product director at Trinity Financial, commented: “If you are looking for a mortgage at the moment, there is a good choice of rates.”
The recent drop in mortgage rates follows the Bank of England’s decision to keep the base rate at five per cent. This comes after a series of increases aimed at curbing inflation.
HSBC predicts the base rate could fall to 2.75 per cent by the end of next year, signalling potential further reductions in mortgage costs.
Swap rates, which influence fixed mortgage pricing, have been declining steadily as markets anticipate additional base rate cuts.
Adrian Anderson of Anderson Harris told The Telegraph: “We’ve had a lot of prospective clients getting in touch with us. There’s a price war, which is good news for consumers. Lenders are pricing in future base rate drops.”
He added that two-year fixed deals are now available significantly below the current five per cent base rate, with five-year deals even cheaper due to expected continued downward trends.
Experts are divided on whether borrowers should fix their mortgages now or wait for potentially lower rates.
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Rohit Kohli, director at The Mortgage Stop, said: “It may be a great time for many to lock in a rate that they feel gives them an affordable monthly payment.” He warns that the upcoming Halloween Budget could push rates back up.
Patricia McGirr, founder of Repossession Rescue Network, cautions against trying to time the market: “Rates might go down again, but waiting could mean missing the chance for peace of mind.”
However, Mike Staton of Staton Mortgages suggests a different approach: “Whilst fixing in may seem tempting, there is a wave to be ridden that I feel will lead to lower rates. Trackers are still the go-to option for me.”
Ultimately, the decision depends on individual circumstances and risk tolerance.