Major banks have recently decreased interest rates on their mortgage products to kick off the new year. Following a reduction in the Bank of England base rate from 4% to 3.75% last December, many mortgage providers have been adjusting their rates downward.
Lloyds Bank is now offering the most competitive homebuyer mortgage rate in the market at 3.47% for Club Lloyd customers, fixed for two years with a 40% deposit requirement and a £999 fee. Halifax is also providing an attractive rate of 3.74% for a two-year fixed rate mortgage.
Barclays has introduced a 3.57% two-year fixed rate mortgage with an £899 product fee for customers with a 40% deposit. Additionally, there is a 3.78% two-year fix available for those looking to remortgage with 25% equity, which comes with a £999 product fee.
HSBC is offering a 3.78% deal with a slightly higher £1,008 fee and a 3.56% two-year fix with a £999 product fee for customers with a 40% deposit.
The average two-year fixed residential mortgage rate stands at 4.80% currently according to Moneyfacts.
David Fell, lead analyst at Hamptons, noted that the decline in mortgage rates is luring more buyers into the market. The drop below 3.5% early this year has prompted potential sellers to reconsider their options due to the reduced monthly cost of owning a new home.
Fell added, “Even a small decrease in rates can alleviate concerns about broader economic challenges, and there is a chance that mortgage rates could further decrease if inflation surprises on the downside.”
For individuals with tracker mortgages, their repayments fluctuate in line with the Bank of England base rate, usually tracking slightly above it. Standard variable rate (SVR) mortgages can change anytime, typically following the base rate trend. SVRs are generally pricier than other mortgage types.
If you have a fixed-rate mortgage, you commit to a set monthly payment for a specific period. Upon the fixed term expiration, you may transition to your lender’s SVR. It is advisable to compare rates and consult a mortgage broker before your mortgage term ends to explore better options.
Lenders typically allow customers to secure new deals around three months in advance. Should rates drop, it might be possible to switch to a cheaper rate, but inquire about associated fees before finalizing any agreements.