Barclays has fired the latest salvo in a new mortgage price war by launching the lowest ever 10-year fixed-rate loan
The mortgage, which is available from 8 January and comes with a £999 fee, allows borrowers with at least a 40% deposit or equivalent equity in their existing property to fix their mortgage rate at 2.99% until 2025.
It is the first time that a fixed rate of this duration has been available below 3% and follows a flurry of activity in the 10-year market at the end of last year that saw loans by Santander and TSB launched at 3.44%.
“In the summer of 2013 five-year fixes dipped below 3% for the first time and everyone thought that was incredible. For a 10-year fix to dip below that rate just 18 months later is extraordinary,” said Andrew Montlake of mortgage brokers Coreco.
There are more than 50 10-year fixed rate mortgage deals available, according to Moneyfacts, compared to a dozen in November 2013 – but their high interest rates have often put borrowers off fixing for longer.
“I still think 10-year mortgages will remain a niche area but this [the Barclays deal] is a brilliant rate and does remove some of the concern borrowers have about this sector, which is that they will be paying too much,” said David Hollingworth of mortgage brokers London & Country.
The rate cut comes just a week after the best-buy two- and five-year fixed rate mortgages fell to record lows and as lenders take advantage of cheap funding driven by low inflation and expected delays in lifting interest rates.
HSBC launched the lowest ever two-year fixed-rate home loan, priced at 1.29%, on 2 January on the same day that its subsidiary First Direct released the cheapest ever five-year fix at 2.39%.
Record low mortgage rates will be welcomed by property industry professionals as much as borrowers, with some forecasts suggesting that house prices could fall by more than 3% this year.
The Centre for Economics and Business Research is predicting prices will fall 0.6% in the year ahead, with London seeing the first marked falls for more than five years. It said prices in the capital will dip by 3.3%.
The latest credit conditions survey by the Bank of England also found much reduced demand for mortgages in the fourth quarter of 2014. Mortgage approvals for house purchase are 22.9% below the 74-month high of 76,611 seen in January 2014. This is because of combined factors including tougher Bank of England mortgage market requirements, high house prices and the uncertainty caused by the coming general election.
Nevertheless the number of first-time buyers climbing on to the property ladder rose by more than a fifth last year to a seven-year high, according to figures from the Halifax. The bank’s mortgage put this down to improving economic conditions and rising employment levels – but cheap loans have also played a part.
“Although the best fixed rates are reserved for those with a 30 to 40% deposit to put down, there is competition throughout the market now,” Hollingworth said. “Somebody with a 10% deposit can get a two-year fixed rate for around 3% and even those with a 5% deposit can get a rate as low as 4.59%.”
