Mortgage rates below 4 per cent are making a comeback, offering a glimmer of hope for prospective homebuyers.
Barclays and Santander UK are among the lenders leading the charge, introducing new deals with sub-4 per cent rates on Thursday.
Barclays has reduced rates across its residential purchase and remortgage products, including a new five-year fixed-rate mortgage at 3.99 per cent. This deal, available to both new and existing Premier customers, comes with a product fee of £899 and requires a minimum 40 per cent deposit.
To join Barclays Premier, people need to open a Premier current account, with eligibility for the account including paying in a gross annual income of at least £75,000, or having a total balance of at least £100,000 in savings with Barclays, in Barclays UK investments, or in a mix of both.
Barclays has also cut the rate on its Green Home five-year fixed-rate mortgage to 3.99 per cent, with the deal also having an £899 fee and requiring a 40 per cent deposit.
The bank’s Green Home mortgages give customers a lower rate on certain deals when they buy an energy efficient property, subject to certain criteria.
Earlier this week, Santander UK announced that from Thursday, borrowers can apply for one of four new products as it launches a range of two and five-year fixed-rate deals at 3.99 per cent.
Eligible borrowers will need a 40 per cent deposit to access Santander’s sub-4 per cent rates, available for house purchase or remortgaging.
Santander’s new deals include a 60 per cent LTV (loan-to-value) two or five-year fixed rate at 3.99 per cent for home buyers, with a £1,999 fee.
A 60 per cent LTV two or five-year fixed rate at 3.99 per cent is also available for homeowners looking to remortgage, with a £1,749 fee.
Yorkshire Building Society also announced rate reductions on Thursday. It said its biggest cuts are aimed at helping people with lower deposits, with some 5% deposit deals being reduced by up to 0.97 percentage points.
Its highlights include a two-year fixed rate for home buyers with a 25 per cent deposit at 4.44 per cent, down from 4.56%, with a £495 fee and free standard valuation.
Yorkshire Building Society product manager, Cheryl Bleasdale, said: “Market rates have provided us with this golden opportunity over the past week and we will continue to watch developments closely and act where we can.”
Ashton Berkhauer, a mortgage expert at MoneySuperMarket, said: “These new fixed-rate deals are a positive sign that competition is heating up amongst mortgage lenders.
“If you’re buying a new home, or you’re one of the 1.8 million households whose fixed-rate deals are ending this year, shop around for the best deal available at the time. Check for any fees and factor them into the overall cost to make sure you’re getting the best value on your mortgage.”
Earlier this month, Lloyds Bank launched a five-year fixed remortgage deal priced at 3.98 per cent.
According to financial information website Moneyfacts, the average two-year fixed homeowner mortgage rate on the market on Thursday morning was 5.45 per cent – having fallen from 5.48 per cent on Wednesday.
The average five-year fixed residential mortgage rate on Thursday morning was 5.26 per cent, down from 5.29 per cent on Wednesday.
Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said: “Many borrowers would have been keeping an eager eye on falling mortgage rates and it will come as positive news that sub-4 per cent mortgages have made their way back onto the market.
“When large lenders make sizeable cuts, it pushes a more favourable outlook into the market. Lenders may begin to feel the pressure to remain competitive and reprice their mortgage ranges to entice new customers in the coming weeks.”
The moves follow a cut in the Bank of England base rate last week, from 4.75 per cent to 4.5 per cent, fuelling hopes that competition between lenders to chop mortgage rates would heat up.
Santander UK also said on Tuesday that it had recorded a 130 per cent increase in mortgage applications in the fourth quarter of 2024 compared with the same period a year earlier, as some home buyers sought to potentially save themselves thousands of pounds in stamp duty costs.
From April, stamp duty discounts will become less generous, with the “nil rate” band for first-time buyers reducing from £425,000 to £300,000 and other home buyers seeing a reduction from £250,000 to £125,000.
Stamp duty applies in England and Northern Ireland.
Purplebricks mortgages managing director Jo Pocklington said: “If you’re hoping to complete before the April deadline, you’re cutting it very fine.
“But before rushing to save a few thousand pounds, make sure you have a done survey to establish whether the property is structurally sound and whether there are any issues with the surrounding area.
“These issues could end up costing you far more than those stamp duty savings, so while time is tight, don’t be rushed into a rash decision without fully appreciating the scale of the problems highlighted.
“You will need time to establish how serious any problems may be, and potentially negotiate the price with the seller as a result.”
Giving some tips to buyers hoping to speed up transactions, Ms Pockington suggested speaking to a broker as early as possible, getting paperwork and proof of a deposit in order, instructing a good conveyancer, being proactive with communications and sorting out a survey quickly.
She also suggested ensuring the deposit was accessible so there was no delay when home buyers were close to exchanging contracts.
