Mortgage

Two lenders cut mortgage rates ahead of Bank of England decision on Thursday

  • The Bank of England is expected to cut interest rates to 4.5% this week 

Two major lenders have announced mortgage rate reductions ahead of the Bank of England’s anticipated interest rate cut later this week.

Barclays announced it would be cutting rates on some of its mortgages for home buyers and people remortgaging.

It is also launching some new rates for borrowers buying energy efficient homes.

It is offering five-year fixed rates starting from 4.13 per cent for those buying a home with an energy performance certificate rating (EPC) of A or B.

As well as the green rates it is also launching a two-year tracker mortgage with a 5.24 per cent with no product fee. 

This may be of interest to borrowers who believe interest rates will continue to fall over the coming year or so.

Heading lower again: Fixed rate mortgages have risen in recent weeks, but now look to set to fall again

Heading lower again: Fixed rate mortgages have risen in recent weeks, but now look to set to fall again

Trackers follow the Bank of England’s base rate, plus a set percentage. In this case it’s base rate plus 0.49 per cent.

If the base rate was cut to 4 per cent as markets are forecasting then this would mean the mortgage rate would fall to 4.49 per cent.

The other lender that decreased mortgage rates is Coventry Building Society, which announced this morning that it would be cutting its fixed rates by up to 0.27 percentage points.

Interest rate cut tipped for Thursday 

The changes by Barclays and Coventry Building Society come ahead of the next Bank of England interest rate decision taking place on Thursday. 

Financial markets are predicting that base rate is likely to be cut from 4.75 per cent to 4.5 per cent.

This has translated into falling Sonia swap rates – bank lending rates which influence the pricing of fixed rate mortgages.

Over the past three weeks five-year swaps have fallen from 4.12 per cent to 3.92 per cent, and two-year swaps have dropped 4.26 per cent to 4.06 per cent. 

Despite this, fixed mortgage rates have been edging higher. This has been in response to the rise in swap rates the previous month, during the spike in gilt yields

The stage is now set for fixed rate mortgage rates to come down again over the coming weeks, according to Chris Sykes, technical director at mortgage broker Private Finance.

‘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 early this year and the market expectations are a little more favourable than they were.

‘If base rate reduces we’ll likely see some further reductions, but not by much as it is already priced in.’

Statement of intent: Barclays has lowered mortgage rates with markets viewing a Bank of England cut on Thursday as likely

Statement of intent: Barclays has lowered mortgage rates with markets viewing a Bank of England cut on Thursday as likely 

Will mortgage rates continue falling? 

Mark Eaton, chief operating officer at lender April Mortgages thinks it is likely interest rates will be cut this week.

‘With a slowing economy, a risk of a short-term inflation hike and Trump’s escalating trade war, markets appear to be anticipating the Bank of England cutting rates on Thursday,’ said Eaton.

‘Expectations of a base rate cut are driving a reduction in swap rates and increased competition among lenders, which on the face of it is good news for borrowers.’

However, Eaton warns that borrowers need to keep their heads in a ‘yo-yoing’ mortgage market. 

‘Unfortunately the risk is that borrowers read too much into this and start believing that mortgage rates are guaranteed to consistently fall,’ added Eaton.

‘With so much economic and political uncertainty, the mortgage market remains highly vulnerable to further rate volatility this year.

‘The yo-yoing effect that we’ve become accustomed to is likely to continue and this means borrowers need to give careful consideration to how they could cope with higher monthly mortgage costs, and the risks that come with this. 

‘Borrowers should be aware that chasing short-term rates may not be in their best interests.’

Best mortgage rates and how to find them

Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs.

That makes it even more important to search out the best possible rate for you and get good mortgage advice. 

Quick mortgage finder links with This is Money’s partner L&C

> Mortgage rates calculator

> Find the right mortgage for you 

To help our readers find the best mortgage, This is Money has partnered with the UK’s leading fee-free broker L&C.

This is Money and L&C’s mortgage calculator can let you compare deals to see which ones suit your home’s value and level of deposit.

You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes.

If you’re ready to find your next mortgage, why not use This is Money and L&C’s online Mortgage Finder. It will search 1,000’s of deals from more than 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C 

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage. 




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