Britain’s biggest banks have launched a new battle over mortgage prices.
Barclays and HSBC cut rates for the second time in two weeks.
This could bring some relief to borrowers looking for a better deal, although in a higher interest rate environment, many people looking to re-mortgage will still find rates significantly higher than what they were paying before.
According to UK Finance, around 1.6 million mortgages are missing out on fixed rates this year.
From Friday, Barclays will cut its two-year and five-year fixed mortgages by up to 0.27%.
A fixed rate mortgage is an agreement where you and your lender agree on an interest rate and pay the same rate for the duration of the deal.
HSBC is expected to reveal full details of its rate cut on the same day.
Both banks already lowered rates last week.
But other important creditors also joined the party.
Halifax cut its rates by 0.19 percentage point on Wednesday, following an earlier cut of 0.23% this week.
Santander followed today, down as much as 0.16%.
Yorkshire Building Society also said it had cut its mortgage interest rates by up to 0.20 percentage point “with immediate effect”.
Nicholas Mendes, mortgage technical manager at John Charcol, said: “Since the general election, the swaps market has seen only a slight dip, but there has been a drop in activity as potential buyers wait in the hope of new government incentives such as increased stamp duty. thresholds or multiple options for first-time buyers.
Swap rates, which underlie fixed-rate mortgages, have fluctuated in recent months, prompting lenders to adjust rates.
Lenders also expect the Bank of England to cut rates this summer, so they have started cutting rates in anticipation.
Major banks and lenders use the BoE’s base rate to set their own interest rates on mortgages, loans and savings accounts.
If they decrease, interest rates on mortgages, loans and savings accounts tend to decrease as well.
According to Nicholas, falling swap rates and a drop in demand meant lenders were now scrambling to make up for lost time.
He added: “Lenders have held rates longer than preferred and are now reassessing them when the election is over.”
“Despite the absence of a cut in the Bank Rate, there is a buffer that allows for a cut.
“We can expect about two weeks of repricing before the break as lenders adjust their margins to appropriate levels.”
Mortgage lenders also tend to cut rates in anticipation of a drop in the prime rate.
Markets expect the Bank of England (BoE) to cut its key rate this August after policymakers left it at 5.25% last month.
However, mortgage interest rates remain relatively high for millions of borrowers after the BoE gradually increased base rates.
According to financial information website Moneyfacts, the average two-year fixed rate home owner mortgage rate in the market is 5.93%.
That’s down from Wednesday’s average rate of 5.94%.
The average five-year fixed rate on residential mortgages is 5.51%. This is unchanged from the previous business day.
Should you fix it?
HERE we will guide you through the advantages and disadvantages of a fixed mortgage.
Pros
- The potential rate increases – If the Bank of England raises the base rate, you won’t feel the impact.
- You will be checked only once during the period – This means if your score goes down because you took out a credit or store card after the deal closed, it won’t affect your mortgage.
- Protection against changes in credit criteria – If mortgage availability criteria are tightened, you may not be able to remortgage at a competitive rate. A fixed term will give you more time to meet the criteria.
- Predictability – You know exactly how much your mortgage payments will be over the term, making planning easier.
Disadvantages
- You won’t benefit if rates go down – You risk losing out on lower rates if the base rate falls during this time.
- Early departure fees – Homeowners face heavy fines if they need to end the contract early. These can be up to 7% of the remaining balance.
- You will be charged a fee for early repayment – If your circumstances change and you want to make significant overpayments or pay them off completely early, you will be charged a fee.
- You could end up overpaying – Homeowners with more money to pay off are usually charged higher rates. By locking in a deal when you don’t have much left to pay, you could miss out on lower rates and as a result, you could end up paying more than you have to.
How to get the best mortgage
Getting the best mortgage depends on what’s available at the time, but there are ways to get ahead of the competition.
Usually, the bigger your deposit, the lower the interest rate you can get.
If you’re remortgaging and your loan-to-value ratio has changed, this can also give you access to better rates than before.
Changing your credit score or increasing your salary can also help you get better rates.
If you’re on a fixed rate, you could see higher rates as you get to the end of the current term after the BoE raised interest rates from 2022 and into last year.
And if you’re nearing the end of a fixed deal in the next six months, it’s worth contacting your broker now to fix a rate.
If it goes down between now and the end of your deal, you can always ask for a different rate before you remortgage.
Leaving a fixed contract early usually comes with an early exit fee, so you want to avoid these extra costs.
But depending on the cost and how much you could save by switching over gluing, it might be worth paying to leave the store. Compare costs first.
To find the best deal, use our mortgage comparison tool to see what’s available.
You can also contact a mortgage broker who can compare for you, with most offering free advice to ensure you get the best deal.
Some brokers charge a fee for advice, so check with them first.
It might cost a few hundred pounds, but overall it could save you thousands on your mortgage.
You will also need to factor in mortgage fees, although some have none at all, or you can add them to the cost of the mortgage.
However, be aware that this means you will pay interest on it and it will cost more in the long run.
Use the mortgage calculator to find out how much you can borrow.
Remember that if you decide to remortgage with a new lender, you will need to go through their availability check.
He can also check your credit file to see if you have paid off any previous debts.
You may also need to provide documents such as utility bills, proof of benefits, payslips for the last three months, passports and bank statements.
It’s possible to avoid new availability checks by remortgaging on a new deal with your existing lender, provided you don’t want to borrow more or extend the repayment period.