Mortgage rates have decreased once more this week, with HSBC and Barclays among the latest lenders to cut their home loan rates. 

HSBC has introduced a new five-year fixed-rate mortgage at an impressive 3.95%, which is below the 4% mark. This move follows similar reductions by Nationwide and NatWest, making HSBC the third lender to offer such a competitive rate. The reduction in HSBC’s rate is 0.19 percentage points, and it comes with a £999 fee. 

This ongoing trend of lower mortgage rates is part of a broader pattern of rate cuts in the market, which may provide more affordable borrowing options for homebuyers and those looking to remortgage.

Barclays has revealed that it will lower its lowest five-year fixed-rate mortgage from 4.04% to 3.84%, with this change taking effect from tomorrow. This reduction follows recent trends in the mortgage market, where several lenders have been adjusting their rates in response to broader economic shifts.

The wave of rate cuts began last week after the Bank of England reduced its base rate for the first time in over four years. On 1 August, the central bank lowered the base rate from 5.25% to 5%. This adjustment has prompted a series of rate cuts from mortgage lenders, including HSBC and Nationwide, who have also introduced sub-4% five-year fixed-rate deals.

Market analysts are now anticipating further rate cuts later this year, as the central bank continues to respond to economic conditions. This ongoing adjustment in interest rates is expected to influence mortgage offerings and may provide more opportunities for borrowers seeking competitive rates.

HSBC best-buy fixed mortgage deal

HSBC is offering a five-year fixed-rate mortgage at 3.95% for both home movers and first-time buyers who can provide a deposit of at least 40%. For a £200,000 mortgage over 25 years, this would mean monthly repayments of approximately £1,050.

In comparison, Barclays has introduced a more competitive rate for home movers. Starting Thursday, Barclays will offer a five-year fixed-rate deal at 3.84% for those with a 40% deposit. This rate is expected to stand out significantly in the market. For a £200,000 mortgage over 25 years, the monthly payments with Barclays would be around £1,038.

Stephen Perkins, managing director at Yellow Brick Mortgages, commented to Newspage: “Barclays has made a strong move with this new offering, setting a high benchmark in the market.”

Ranald Mitchell, director at Charwin Mortgages, views the recent trend of lowering mortgage rates as a significant shift in the market landscape. He explains, “The move by several lenders to offer rates below 4% is a welcomed change. It’s anticipated that these competitive rates will eventually extend to higher loan-to-value brackets, which could make borrowing more accessible for a larger group of people.”

Mitchell also believes that these rate cuts will have a stimulating effect on the property market. He comments, “Barclays’ decision to lower its mortgage rates to below 4% is a major development for borrowers and a much-needed boost for the housing market. This strategic move is expected to generate renewed interest from prospective buyers who have been cautious and waiting for more advantageous rates. Such a shift could prompt those who have been hesitant to enter the market to reconsider and take action.”

In addition to offering the leading sub-4% five-year fixed mortgage, Barclays has also secured the top spot in the two-year fixed mortgage market. The bank’s new 4.22% two-year fixed mortgage deal, which comes with an £899 fee, is available to home buyers who can provide a deposit of at least 40%. This rate sets Barclays apart from its competitors in this category.

Following closely, HSBC offers the second-best two-year fixed rate at 4.41%. While this is slightly higher than Barclays’ rate, it still provides a competitive option for those looking for shorter-term mortgage solutions.

The significance of these rates becomes clearer when compared to the average market rate for a two-year fixed mortgage, which stands at 5.74%, according to Moneyfacts. For many borrowers, the Barclays rate represents a considerable saving. For instance, a borrower securing the Barclays 4.22% rate on a £200,000 mortgage, repaid over 25 years, would face a monthly payment of around £1,080. This is notably lower than the market average, where the same mortgage would cost approximately £1,257 per month. 

These lower rates could be particularly attractive to prospective borrowers who have been hesitant due to higher average rates, potentially making home ownership more accessible for a wider audience.

Homeowners currently looking to remortgage have new opportunities to save, thanks to Barclays’ latest mortgage offers. According to UK Finance, approximately 700,000 fixed-rate mortgages are due to end in the latter half of this year, creating a significant opportunity for those seeking to refinance their home loans.

Barclays has introduced a notable five-year fixed-rate mortgage at 4.06% for homeowners with at least 40% equity in their property, which equates to a 60% loan-to-value ratio. This competitive rate comes with a £999 fee and places Barclays in a leading position in the market for this category of mortgage.

In comparison, MPowered Mortgages is the next best lender, offering a similar five-year fixed rate of 4.19%. For those with a 25% equity stake in their home, Barclays will also offer a five-year fixed rate of 4.2% starting from tomorrow. MPowered Mortgages will offer the next best rate at 4.35% for this equity level.

HSBC has joined the trend by cutting rates for various mortgage categories. This includes reductions for home movers and first-time buyers who are purchasing with a 25% deposit. HSBC has also adjusted rates for those looking to remortgage, further broadening the options available to borrowers.

What next for mortgage rates?

Mortgage brokers anticipate that other major lenders will soon follow the lead of Barclays and HSBC in reducing their mortgage rates. This trend is partly due to the need for lenders to attract new business and meet their annual targets.

In addition to competition, changes in the money markets and predictions about future interest rates are also influencing these rate cuts. These expectations are evident in Sonia swap rates, which are financial agreements where two parties, such as banks, agree to exchange a series of future fixed interest payments for variable payments, based on a specified amount.

Mortgage lenders use swap agreements to manage the interest rate risk associated with offering fixed-rate mortgages. These swap rates reflect financial institutions’ expectations for future interest rates.

As of Monday, five-year swap rates are at 3.57%, and two-year swap rates are at 4%. This is a decrease from 3.89% and 4.4% at the start of last month, and a significant drop from 4.73% and 5.41% a year ago.

Darryl Dhoffer, a mortgage broker at The Mortgage Expert, commented on the trend, stating, “Sonia swaps are continuing to decline, which likely influences the rate reductions from banks like HSBC and Barclays. Every rate cut helps, and we are seeing an unexpectedly busy August.”

However, Nicholas Mendes, mortgage technical manager at broker John Charcol, offered a cautionary note. He advised, “While it may be tempting to wait for rates to fall further, it’s important to remember that nothing is certain. If the market experiences any disruptions, we could see a halt or reversal in the current trend. Securing a rate now is advisable. Keep monitoring the market, and if rates drop further, you can switch to a better deal with the same lender or choose a different one. If rates rise, you’ll have already secured favourable terms.”

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