Mortgage Rates Fall – But For How Long?

Major mortgage lenders including Barclays and Santander have announced cuts to their mortgage rates, following a lead set by HSBC, Halifax and Leeds last week. Mortgages are now available at below the magic 4 percent figure as competition between lenders grows more intense. 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.”

Santander’s announcement even includes a sub-4 percent deal, available to new and existing customers with a deposit of at least 40 per cent on a five-year fixed rate mortgage. All its 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 Buy-to-let three-year fixed rates will be withdrawn. Barclays has offered a two-year rate fixed at 4.17 per cent, down from 4.62 per cent, for borrowers able to pay a 40 percent deposit. Borrowers with a smaller 25 percent deposit will be offered a two-year rate of 4.2 percent, down from 4.7 percent.

Rates at the Co-operative Bank have been reduced by more than one percent for some deals, so existing customers looking to remortgage may now be offered a 2-year fixed rate starting from 3.85 per cent, with 5-year deals starting at 3.74 per cent. New customers will be offered 4.22 per cent and 3.84 per cent respectively.


The fall in mortgage rates is seen as following the drop in so-called ‘market swap’ rates in December, prompted by falls in inflation and Bank of England interest rates. Mortgage lenders use ‘swap rates’ to guide their fixed-rate mortgage prices, and the fall on mortgage rates is seen as anticipating further decreases in the Bank of England base rate, which could in turn prompt further falls in mortgage rates.

Experts suggest that it may be time for borrowers on variable rate mortgages to change to a fixed-rate deal, which should turn out cheaper. Fixed rate mortgage deals remain above the levels of available before the ‘mini-budget’ of 2022,  with average two-year fixed rates at 5.81 per cent, down from a high of 6.86 percent last summer, compared to 4.7 percent just before the “mini-budget”.

Further falls in Bank of England base rates may not happen until the Spring, so there is still time for other lenders to reduce their rates. With some rates already below the relevant swap rate, an extremely unusual position for lenders, it may be that reduced lending rates may not be around for long.

The news comes amid controversy over remarks on teh BBC’s Today programme by NatWest boss Sir Howard, who earns £764,000 a year, that it is not ‘that difficult’ to buy a house. Campaign group Generation Rent described his comments as “astounding”, while another critic said it demonstrated a “staggering disconnect between bankers and reality”.

See also: Is ‘Hands-Off’ Property Management Right for You?


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