Mortgage rates have been gradually decreasing since the Bank of England (BoE) reduced interest rates from 5.25% to 5% in August.
However, these rate cuts have mainly affected lower loan-to-value (LTV) and buy-to-let mortgages, leaving first-time buyers with limited benefits.
Many homeowners have struggled with higher rates after their initially low fixed-rate deals expired, and first-time buyers continue to face difficulties entering the property market.
With expectations that the BoE might lower rates again next week, some lenders have started to reduce their mortgage rates.
NatWest has unveiled the lowest five-year fixed mortgage rate since the Mini Budget of September 2022, marking a significant shift in the mortgage market. This move is expected to benefit many borrowers who have been struggling with higher rates.
Following NatWest’s lead, both TSB and Barclays have also announced reductions in their mortgage rates. Barclays has cut rates on selected fixed deals by up to 0.4 percentage points. This adjustment applies to both new and existing borrowers, including those with buy-to-let (BTL) mortgages, offering potential savings for a wide range of customers.
Similarly, TSB has made cuts across its mortgage offerings, including deals for home movers and first-time buyers. The reductions apply to both two-year and five-year fixed repayment mortgages. For those looking to remortgage, the rates on five-year fixed deals have dropped by up to 0.3%, providing a more affordable option for existing homeowners.
These rate adjustments reflect a broader trend influenced by recent expectations that the Bank of England may lower interest rates again soon.
Tim Thomas, Policy and Campaigns Officer at Propertymark, emphasised the importance of clear guidance from the UK Government on new energy efficiency targets. He stressed that landlords need both financial and practical support to meet the upcoming legislation and contribute to the 2050 net zero goals. Without this assistance, and a recognition of the varied types of properties, these targets are unlikely to be met.
Thomas also highlighted the urgency as the 2030 deadline approaches. He called for more clarity on exemptions, particularly the details of a cost-cap exemption, and whether the Government plans to set interim targets before 2030.
The sector, according to Thomas, is in need of concrete answers to ensure landlords have the time and resources to make the necessary changes. Without this clarity, both landlords and tenants could be affected, with energy efficiency improvements potentially delayed.
He added that clearer guidance on how exemptions will work is essential, as not all properties are the same, and some may face more challenges than others in meeting the new regulations. Knowing the details of exemptions, including any cost limitations, would help landlords plan more effectively.
Thomas stressed that without proper support and clear milestones, the sector may struggle to achieve the energy efficiency targets set by the Government, putting the broader goal of net zero by 2050 at risk.
The recent rate cut by TSB is expected to assist first-time buyers who are looking to enter the property market with just a 5% deposit. This reduction in rates could make home ownership more accessible for those who have been saving up and waiting for a more affordable mortgage option.
Karen Noye, a mortgage expert at Quilter, expressed optimism about the development. She stated, “It’s encouraging to see lenders starting to lower their mortgage rates. This change could be welcome news for first-time buyers who have been holding out for a better deal.” Lower rates can make a significant difference in monthly payments and overall affordability for new buyers.
It’s important to note that the specific mortgage rates available to individuals will vary based on a number of factors. These include the borrower’s income, the amount they wish to borrow, and their credit score. Each of these elements plays a crucial role in determining the final rate that a borrower may be offered.
Additionally, there have been recent improvements in the variety of mortgage products available for first-time buyers. This expanded choice can provide more options tailored to different financial situations and needs, further supporting those who are trying to get onto the property ladder.
Overall, while the rate cuts and improved product choices are promising, prospective buyers should consider their personal financial situation and consult with mortgage advisors to find the best possible deal for their circumstances.
According to Moneyfacts, as reported by The Sun, average rates for two and five-year fixed mortgages have decreased since the start of September across various loan-to-value (LTV) ratios.
For instance, the average rate for a five-year fixed mortgage with a 95% LTV has dropped from 5.56% at the beginning of the month to 5.54% now.
Similarly, the average rate for a two-year fixed mortgage with a 95% LTV has decreased from 6.03% to 6%.
Rachel Springall, a finance expert at Moneyfacts, commented: “It’s crucial that banks and building societies continue to support first-time buyers, as they play a vital role in the mortgage market.”
“Reducing the upfront cost of a mortgage is crucial for first-time buyers who may have already spent their savings on a deposit, legal fees, and moving expenses.
The main issue for first-time buyers is affordability. With interest rates higher than anticipated and affordable housing still in limited supply, finding a manageable mortgage can be challenging.”
Some lenders have faced criticism for offering better rates to new customers compared to existing mortgage holders.
Nicholas Mendes, mortgage technical manager at broker John Charcol, noted, “This two-tier pricing system is unfortunately quite common when you are nearing the end of your mortgage deal.”
“Existing lenders frequently offer better rates to new remortgage customers than to those transferring their existing products.
This indicates that staying loyal to your current lender doesn’t always result in the best deal, so it’s important to compare options and shop around.”
Download NOW
4 Simple Steps To Becoming Wealthy Through Property