Two major mortgage lenders announce ‘very significant’ rate cuts

Two major mortgage lenders have unveiled “very significant” mortgage rate cuts, in what one of the UK’s leading mortgage brokers has called a “turning point” for households who have faced years of soaring bills.

Barclays and Santander are the latest to slash rates, following HSBC and Halifax last week.

From Wednesday, Barclays has said it is cutting rates by up to 0.5 per cent and launching a two-year fixed mortgage at 4.17 per cent for anyone with a 60 per cent loan to value, down from 4.62 per cent, with a fee of £899.

Santander will also cut rates tomorrow bringing some mortgage deals down to less than 4 per cent.

David Hollingworth at L&C mortgage brokers told The Independent: “It is definitely a turning point. Compared to where we were last summer, rates have dropped massively. It’s good news for buyers.”

While HSBC’s cuts were notable for bringing rates down below 4 per cent, Barclays says the two-year fixed rate mortgage will apply to anyone buying a new home and not remortgaging for an existing one.

Other cuts will apply to 75 per cent LTVs (loan to value ratios involving a 25 per cent deposit), which will see rates drop from 4.7 per cent to 4.2 per cent and 95 per cent mortgages having rates slates from 5.8 per cent to 5.5 per cent.

Santandar will launch a five-year fixed rate loan at 3.89 per cent with a £999 fee for those remortgaging and 3.94 per cent for people buying for the first time with a 40 per cent deposit.

Other changes by Santander include a reduction in standard residential fixed rate mortgages by up to 0.82 per cent for new customers and all new build exclusive rates reduced by up to 0.56 per cent.

All large loan fixed rates will decrease by 0.25 per cent and buy-to-let and five-year fixed rates will go down up by to 0.56 per cent. Buy-to-let three-year fixed rates will be withdrawn.

The Bank of England had reported that interest rates on mortgages, loans and savings had been at their highest level for many years, with the the UK’s base interest rate being increased 14 times over the past two years.

Mr Hollingworth said it was difficult to predict the future but said: “It will really help consumer confidence after rapid rises in rates that dented that confidence and menat the housing market fell off a cliff edge.”

Leading mortgage broker, Mortgage Advice Bureau, told The Independent that the cuts mean consumers can expect further price reductions.

Danny Belton, head of lending at Mortgage Advice Bureau said: “The launch of a host of new lower rates is a welcome boost to those looking to buy or remortgage, especially after a challenging 2023.

“The drop we’ve seen in mortgage rates is due to swap rates falling and lenders passing on the reductions to customers. If swap rates continue to fall, the cost of funding for lenders will also reduce, which will continue to lead to further price reductions.

“Whilst we have started 2024 positively with a few rate reductions, by May we could see the first base rate cut, assuming conditions have continued to improve.

“This is unequivocally good news for the millions of homeowners who will be looking to remortgage or buy this year, as the situation for borrowers is certainly improving.

“But the lowest rates, for the moment, will mostly be for those with a larger deposit. For first time buyers, and those with a lower amount of equity built up, rates remain high.

“However, as the year progresses, we’re hopeful that lenders will start to reduce these so that first time buyers can make homeownership a reality too.”

Gareth Davies, director at South Coast Mortgage Services told Sky News: “This is a very significant move by Barclays. The best one we’ve seen in 2024 yet.

“To see two-year fixed deals edging this much closer to 4% is not something many would have predicted a few months ago.”

Adrian MacDiarmid, head of mortgage lender relations at Barratt Developments said they expected more lenders to follow in the coming days.

He said: “There are a lot of lenders competing for market share and this will bring more opportunities to buy a home.

“Prospective buyers who feared that purchasing their own home was beyond them - because of barriers such as saving for a deposit - could find that mortgages are cheaper than they had expected.

“They might also be able to borrow more than expected by opting for the security of a long-term fixed rate mortgage, which could enable them to borrow up to six times their income.

“We would recommend that customers talk to a mortgage adviser who can look at all of the options available and find one that suits their circumstances.”