Major banks have recently reduced interest rates on their mortgage products to kick off the new year. The Bank of England had lowered the base rate from 4% to 3.75% in December, benefiting many mortgage holders. This rate cut trend has prompted several lenders to follow suit and decrease their mortgage rates.
Lloyds Bank is now offering the most competitive homebuyer mortgage at 3.47% for Club Lloyd members, fixed for two years, and requiring a 40% deposit. The associated fee for this deal is £999. Halifax, on the other hand, is providing 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 fixed deal for those looking to remortgage with 25% equity in their property, which comes with a £999 product fee.
HSBC offers a 3.78% mortgage deal with a slightly higher fee of £1,008. For customers with a 40% deposit, there is a 3.56% two-year fixed rate mortgage with a £999 product fee.
The average two-year fixed residential mortgage rate currently stands at 4.80% according to Moneyfacts. David Fell, lead analyst at Hamptons, mentioned that the declining mortgage rates are attracting more buyers into the market. He highlighted that with rates dropping below 3.5%, potential sellers are reevaluating their options as the cost of owning a new home decreases.
Fell also suggested that even a slight reduction in rates can alleviate concerns about economic uncertainties, emphasizing the possibility of further rate drops this year if inflation surprises on the downside.
For those with tracker mortgages, their deals and monthly payments fluctuate in line with the Bank of England base rate, usually tracking slightly above it. Standard variable rate (SVR) mortgages can change at any time but generally move in accordance with the base rate. SVRs tend to be the most expensive mortgage type. Fixed rate mortgages entail paying a fixed amount each month for a specific period, after which borrowers are typically transferred to the lender’s SVR.
If your mortgage is nearing expiration, it is advisable to compare rates and consult a mortgage broker to explore available options. Lenders usually allow securing a new deal around three months in advance. If rates decrease, cancelling an agreed deal for a cheaper rate may be possible, but borrowers should confirm with their lender regarding any associated fees before proceeding.