A new mortgage price war has broken out among some of Britain’s biggest lenders sending headline fixed rates back down below the psychologically important 4% mark.
Both Barclays and HSBC have launched sub 4% deals today, a level not seen since the start of the year, though they come with strings attached.
HSBC’s best five-year fixed rate is now 3.92% though that is only available to premier banking customers who have a deposit of at least 40%. There is also a £1,499 fee. The best rate for standard customers is 3.95% with a £999 fee.
Meanwhile Barclays best five-year rate comes down from 4.03% to 3.83%, again for Premier customers with a 40% deposit. For other customer the best rate comes down from 4.04% to 3.84%. There is an £899 fee for both deals.
Mortgage rates “starting with a three” are seen as crucial to unlocking the market by encouraging buyers to take the plunge.
Lenders have been responding to falls in the so called SONIA swap rates in the City money markets that effectively set the price at which banks and building societies can lend on to residential buyers.
Rates have been falling in anticipation of faster than expected monetary loosening by the Bank of England over the coming months. The Bank made it first cut in four years last reducing its benchmark rate from 5.25% to 5%.
Aaron Strutt, product and communications director at brokers Trinity Financial, said: “Barclays and HSBC have been pushing lenders like Nationwide and Halifax pretty hard this year. They are keen to offer the cheapest rates and issue as many mortgages as possible. NatWest launched a 3.97% five-year fix a few days ago and it has swiftly been undercut by HSBC and Barclays.
“It is good news the banks and building societies are lowering their rates again particularly as the two- and five-year fixes are looking so much better value for money. The lenders are still fighting it out for business but the cheapest deals really are limited to borrowers with the biggest deposits. When many first time buyers see that rates are improving and check again to see how much mortgage payments would potentially be, they are frustrated the monthly costs are not coming down very much.
“Lots of borrowers think rates will come down over the near term and don’t want to lock into a five-year fix. Many will be tempted by Barclays new 4.22% two-year fix especially as the split between the number of people taking two- or five year fixes is pretty even.”
