Halifax now has a two-year fixed interest rate of 4.97% for buyers with up to 40% deposits or equity. Meanwhile, Barclays now has a two-year fixed interest rate for homebuyers at 4.95%.
In fact, both lenders have made cuts to a number of fixed mortgage deals providing a glimmer of positivity to borrowers facing the prospect of a BoE. Raise interest rates Thursday.
Mortgage interest rates have been on the rise over the past two months, topping 6% at a typical five-year fixed rate in October.
According to Moneyfacts, the average two-year fixed rate is 5.97% today, while the typical five-year fixed rate is 5.99%.
However, Toby Quanstrom, director of Eastbourne-based Quanstrom Financial, told Newspage that the moves made by Halifax and Barclays today were not the start of a series of interest rate cuts.
He added: “Lenders exceeded their revenues in October and are now offering a little money, but this is just a flow, not a flood.
“Why now? Thursday’s base rate hike has already been built into fixed pricing, so lenders have room to compete, and are targeting remortgages they can’t afford to lose.
“Where next? Sideways, not down. Many lenders allow borrowers to lock in an interest rate up to six months in advance, so anyone with a deal expiring soon may gain little by waiting.”
However, Nicholas Mendes, mortgage technical expert at John Charcol, reported that a “handful” of major lenders were offering fixed interest rates below 5% again this morning.
This included HSBC, NatWest and Santander along with Halifax and Barclays. All deals under 5% are for mortgages with a LTV ratio of 60% or less, and are reserved for those with at least 40% equity.
He said: “The return of fixed interest rates below 5% represents a welcome psychological boost for borrowers and shows that lenders are keen to compete for business as the end of the year approaches.
“These deals are mainly available to borrowers with at least a 40% deposit or equity, and many come with conditions such as being an existing customer or owning an energy efficient property. First-time buyers and those with smaller deposits are still looking at interest rates above 5%.”
Mendes also pointed out that many deals had fees as high as £1,499. For a smaller loan, a slightly higher rate with lower fees can be cheaper overall, he explained.
Would a tracker be a good option?
Tracker mortgages were “back in the conversation” for some borrowers, Mendez explained.
With the Bank of England on the verge of raising interest rates, this may not seem a particularly wise choice. However, most are free of early repayment fees, which, Mendez explained, gives borrowers the flexibility to move to a fixed rate later without penalty.
“The trade-off is less certainty about monthly payments, which is more important for families who don’t have a lot of room in their budget,” he added.
“Borrowers with a deal expiring in the next six months can usually lock in a new interest rate now, and many lenders allow them to switch to a cheaper product before expiry if rates continue to fall, providing some protection either way.”
