The battle for new mortgage customers continues to see lenders trying to out-do each other amid slowly falling interest rates, with Barclays the latest lender to cut some products to sub-4 per cent.
First-time buyers were also give a boost this week with news that Bank of England rules were being relaxed, allowing more deals to be handed out with a higher than usual loan to income ratio.
A raft of cuts for both new mortgages and remortgage customers from the high street bank will come into effect from 11 July, with one highlighted by Barclays as being a joint-best on the market for two-year fixes.
That specific product will offer a 3.83 per cent interest rate for two-year fix, with a £999 fee - though is only for a maximum of 60 per cent loan to value mortgage.
TSB and Leeds Building Society have also launched sub-4 per cent deals this week.
Even so, it is good news for homeowners and buyers to see big competition forcing rates down - though external factors mean some might consider a slightly longer term as the ideal length for a new mortgage deal, Peter Stimson, director of mortgages at MPowered Mortgages, told The Independent.
“At the moment, three-year fixed rates are a good option for borrowers,” Mr Stimson said. “We call three-year fixed rates the ‘goldilocks’ rate: not too short and not too long, given the uncertainty over where interest rates are at the moment and where they could go to in the months ahead.
“Three-year fixed rates effectively give borrowers another year of stability and importantly takes us to almost the end of the Trump presidency and potentially into a more stable rate period.”
Barclays have also announced five-year terms which offer sub-4 per cent rates, while two products for new purchases offered three-year fixes at only just over the 4 per cent mark.
It follows the likes of Nationwide, HSBC and NatWest, among others, all offering sub-4 per cent deals recently.
With an estimated 1.8m fixed rate mortgage deals ending in 2025, Mr Stimson said the battle between lenders and the longer-term uncertainty made it an ideal time for those looking at renewals to take the plunge.
“There is also still a lot of volatility in the markets which makes lenders’ pricing challenging and it is difficult for them to price consistently for long periods, as the below graph shows.
“Two-year rates have consistently been falling since last year, but this has not been the case for five-year and ten-year swaps which have risen off the back of concerns over Government borrowing.
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“Generally, now is in my view a good time to renew in my view. Future Bank of England rate cuts have already been priced into the swap curve and therefore mortgage rates. There is no certainty that mortgage fixed rates will continue to fall beyond where there are at the moment, with global economic uncertainty prompted by Trump's administration making it harder to predict future trends in mortgage rates.”
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