Two major lenders have announced mortgage rate reductions ahead of the Bank of England’s expected interest rate decision later this week.
Barclays has confirmed rate cuts on some of its mortgage products, benefiting both home buyers and those looking to remortgage. Additionally, the bank is introducing new rates specifically for borrowers purchasing energy-efficient homes.
For buyers purchasing properties with an Energy Performance Certificate (EPC) rating of A or B, Barclays is offering five-year fixed rates starting from 4.13%.
Alongside its green mortgage options, the lender is also launching a two-year tracker mortgage at 5.24% with no product fee. This may appeal to borrowers who anticipate further interest rate cuts in the near future.
Tracker mortgages are directly linked to the Bank of England’s base rate, with an additional fixed percentage added on top. In this case, the rate is set at the base rate plus 0.49%, meaning any changes to the base rate will automatically impact the borrower’s mortgage repayments.
If the Bank of England moves forward with the widely expected rate cut to 4%, the tracker mortgage rate would decrease accordingly, bringing it down to 4.49%. This could make tracker mortgages an appealing option for borrowers who anticipate further reductions in interest rates over the coming months.
Another lender adjusting its mortgage rates is Coventry Building Society. The company announced this morning that it will be lowering its fixed-rate mortgage products by up to 0.27 percentage points. These reductions could offer some relief to homeowners and prospective buyers looking for more competitive borrowing options in a shifting market.
Interest rate cut tipped for Thursday
The recent mortgage rate reductions by Barclays and Coventry Building Society come just ahead of the Bank of England’s upcoming interest rate decision, scheduled for Thursday.
Financial markets are widely anticipating a base rate cut, with expectations that it will drop from 4.75% to 4.5%. This speculation has contributed to a decline in Sonia swap rates—key interbank lending rates that influence the pricing of fixed-rate mortgages.
Over the past three weeks, five-year swap rates have fallen from 4.12% to 3.92%, while two-year swaps have declined from 4.26% to 4.06%. Despite this, fixed mortgage rates have been gradually increasing in response to last month’s rise in swap rates, driven by a spike in gilt yields.
However, according to Chris Sykes, technical director at mortgage broker Private Finance, the stage is now set for fixed mortgage rates to begin decreasing again in the coming weeks.
“A lot is pointing towards a base rate cut later this week,” said Sykes. “It looks like things have settled down following all the worry in the bond market earlier this year, and market expectations are now more favourable than before. If the base rate reduces, we’ll likely see some further mortgage rate cuts, but not by much, as this change has largely already been factored in.”
Will mortgage rates continue falling?
Mark Eaton, chief operating officer at lender April Mortgages, believes an interest rate cut is likely this week.
“With a slowing economy, the risk of a short-term inflation rise, and Trump’s escalating trade war, markets seem to be expecting the Bank of England to lower rates on Thursday,” said Eaton.
He explained that expectations of a base rate cut are already influencing swap rates, leading to increased competition among lenders. On the surface, this appears to be positive news for borrowers, as it could result in lower mortgage rates.
However, Eaton cautioned against assuming that mortgage rates will consistently decline. “The danger is that borrowers may misinterpret these developments and believe that mortgage rates are guaranteed to keep falling,” he said.
With ongoing economic and political uncertainty, he warned that the mortgage market remains highly unpredictable. The fluctuating rates seen in recent months are likely to continue, meaning borrowers should carefully assess how they would manage potential increases in their monthly repayments.
“The mortgage market remains volatile,” Eaton added. “Borrowers need to think carefully before chasing short-term deals, as this may not always be in their best interests.”