Major lenders have recently cut their mortgage rates, with brokers now predicting that some of the best deals could dip below 3.5% early next year.
Over the past month, prospective homebuyers and those looking to remortgage have noticed rates becoming increasingly competitive.
High street banks including Barclays, Nationwide, Santander, and NatWest have all adjusted their offers in recent weeks, reflecting the ongoing shift in the market.
Santander currently leads the market with a two-year fixed-rate mortgage at 3.51%, available to home movers with at least a 40% deposit and a loan of £500,000 or more. The deal comes with a substantial £1,999 fee.
For a £500,000 mortgage repaid over 25 years, this would equate to monthly payments of around £2,507, making it one of the most attractive options for large loans currently on offer.
Smaller mortgages with Santander start at 3.55% over two years, carrying a lower £999 fee, offering more accessible options for buyers needing smaller loans.
Nationwide has also reduced its rates, now offering a two-year fix at 3.58% for mortgages between £300,000 and £5 million, with a £1,499 fee. For smaller loans, the two-year fix is 3.63% with a £999 fee.
Barclays has followed suit, providing a two-year fixed-rate mortgage at 3.63% with an £899 fee, while households looking to remortgage can secure rates as low as 3.69%.
For those considering a five-year fixed rate, deals now start from 3.76%, applicable to both home movers and existing borrowers seeking to remortgage.
Mortgage brokers attribute these reductions to expectations of a likely Bank of England base rate cut of 0.25 percentage points on 18 December, which would lower interest rates from 4% to 3.75%.
Ben Perks, managing director at Orchard Financial Advisers, commented: “We could see rates fall below 3.5% before the year ends. Lenders are positioning themselves aggressively, and with a base rate cut very likely, more competitive deals are expected as the price war intensifies.”
Some brokers also point out that subdued lending activity ahead of the Budget has left banks and building societies eager to attract new borrowers.
Nick Gatti, a mortgage adviser at NG Mortgages, noted: “Data from the Bank of England shows mortgage approvals dropped in October, reaching their lowest level since February, while net mortgage borrowing also fell sharply. This reduced demand is prompting lenders to offer more competitive rates to meet targets.”
The combination of low activity and anticipated base rate cuts is encouraging lenders to sharpen their pricing, benefiting both first-time buyers and those seeking to switch deals.
With the year-end approaching, borrowers may find opportunities for historically low mortgage rates, particularly if the expected rate reduction is confirmed by the Bank of England.
As lenders continue to compete for customers, monitoring the market closely in the coming weeks will be essential for those hoping to secure the most favourable deals.
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