Major banks like Barclays and Santander have slashed their mortgage rates, signaling a potential boon for UK homebuyers. This trend, initiated last week by HSBC and Halifax, continued with Barclays and Santander announcing substantial reductions.

Santander Leads with Attractive Deals

Santander has made a strong entry with an appealing sub-4 percent deal. This offer is available to both new and existing customers who can provide a 40 percent deposit on a five-year fixed-rate mortgage. The bank has announced that its residential fixed rates will see a decrease of up to 0.82 percentage points starting from Wednesday.

Barclays Follows Suit

Not to be outdone, Barclays is also introducing competitive rates. From Wednesday, they will offer a two-year fix at 4.17 percent, a drop from 4.62 percent, for those with a 40 percent deposit. The rates across its residential range are set to decrease by up to 0.5 percentage points. Furthermore, for a smaller deposit of 25 percent, Barclays will offer a two-year rate of 4.2 percent, a decrease from the previous 4.7 percent.

Co-operative Bank Cuts Rates

The Co-operative Bank isn’t far behind, having already reduced rates by more than one percentage point for some deals as of Tuesday. Existing customers looking to remortgage can now access a two-year fix starting from 3.85 percent, while five-year deals start at 3.74 percent. New customers can avail of rates at 4.22 percent and 3.84 percent for two-year and five-year deals, respectively.

The Trend of Rate Cuts

These changes come in the wake of similar moves by HSBC, Halifax, and Leeds Building Society across their residential ranges. The trend suggests a competitive market among lenders, further fueled by a decrease in market swap rates last December. This drop was influenced by predictions of a quicker pace of falls in inflation and Bank of England interest rates.

Expert Insights

Adrian Anderson, director at broker Anderson Harris, notes that the market is anticipating a quicker reduction in the base rate than what the Bank of England has indicated. He predicts a continued reduction in fixed-term pricing from lenders. This sentiment is echoed by Aaron Strutt, a director at broker Trinity Finance, who attributes the rate cuts to the falling cost of funding mortgages, as indicated by swap rates.

A Historical Perspective

Despite the recent falls, mortgage rates remain higher than those available before September 2022’s “mini” Budget. Average two-year fixed rates are currently 5.81 percent, down from last summer’s high of 6.86 percent, but still above the pre-Budget rate of 4.7 percent.

Future Predictions and Caution

While further cuts are likely, they may not be dramatic, according to Chris Sykes, technical director at mortgage broker Private Finance. Some rates in the latest cuts are even below the relevant swap rate, a rare situation which might not last long.

Conclusion

This wave of mortgage rate cuts by major banks provides an opportune moment for UK homebuyers and those looking to remortgage. However, potential buyers and homeowners should remain vigilant, as the market could see changes in the coming months, especially with the Bank of England’s future decisions on base rates.