Mortgage alert: Barclays launches cheapest deal on the market as price war breaks out

Barclays has unveiled a new market-leading mortgage rate of 3.73 per cent for two-year fixed deals, available to purchasers with deposits of at least 40 per cent.

The rate, which takes effect from today, represents the most competitive offer currently available in the UK mortgage market.

Monthly repayments on a £200,000 mortgage over 25 years would amount to £1,026 under this deal, which carries an £899 product fee.

Barclays existing mortgage rate reductions

Purchase only

• Premier 2-Year Fixed (60 per cent LTV) – 3.85 per cent with £899 product fee will decrease to 3.72 per cent.
• Minimum loan £5,000 | Maximum loan £2million
• 2-Year Fixed (60 per cent LTV) – 3.86 per cent with £899 product fee will decrease to 3.73 per cent.
• Minimum loan £5,000 | Maximum loan £2million
• 2-Year Fixed (60 per cent LTV) – 4.06 per cent with no product fee will decrease to 3.93 per cent.
• Minimum loan £5,000 | Maximum loan £2million
• 2-Year Fixed (95 per cent LTV) – 4.87 per cent with no product fee will decrease to 4.82 per cent.
• Minimum loan £25,000 | Maximum loan £570,000
• Premier 5-Year Fixed (60 per cent LTV) – 4.00 per cent with £899 product fee will decrease to 3.97 per cent.
• Minimum loan £5,000 | Maximum loan £2million
• 5-Year Fixed (60 per cent LTV) – 4.01 per cent with £899 product fee will decrease to 3.98 per cent.
• Minimum loan £5,000 | Maximum loan £2million
• 5-Year Fixed (60 per cent LTV) – 4.19 per cent with no product fee will decrease to 4.09 per cent.
• Minimum loan £5,000 | Maximum loan £2million
• 5-Year Fixed (95 per cent LTV) – 4.82 per cent with no product fee will decrease to 4.79 per cent.
• Minimum loan £25,000 | Maximum loan £570,000
• Green Home 2-Year Fixed (60 per cent LTV) – 3.96 per cent with no product fee will decrease to 3.83 per cent.
• Minimum loan £5,000 | Maximum loan £2million
• Green Home 5-Year Fixed (60 per cent LTV) – 3.91 per cent with £899 product fee will decrease to 3.88 per cent.
• Minimum loan £5,000 | Maximum loan £2million

The competitive mortgage landscape has intensified as multiple high street banks announced rate reductions within the past week.

Yorkshire Building Society has just announced a series of mortgage rate reductions of up to 0.23 per cent, including a major cut to its flagship Income Lifter product, which allows borrowers to take out up to 5.5 times their income.

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Effective immediately, the lender has lowered rates across its two and five-year fixed products. Two-year fixes are down by as much as 0.20 per cent, while five-year deals have fallen by up to 0.23 per cent.

The biggest cut applies to the five-year Income Lifter mortgage, now priced at 4.43 per cent, down from 4.66 per cent. The product, aimed particularly at helping first-time buyers, allows borrowing up to 90 per cent loan-to-value (LTV) with a £995 fee and free valuation.

Other notable changes include a two-year fixed deal at 3.87 per cent for purchases up to 60 per cent LTV, and a five-year fix at 4.16 per cent for remortgages up to 85 per cent LTV.

The society’s £5,000 Deposit Mortgage, designed for first-time buyers purchasing homes worth up to £500,000, has also been reduced to 5.40 per cent, down from 5.46 per cent.

LATEST DEVELOPMENTS:

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HSBC revealed cuts across various residential mortgage products, whilst Santander reduced its three-year fixed rates by as much as 0.36 percentage points. NatWest joined the trend on Monday, lowering its two-year fixed mortgage rate to 3.77 per cent.

Halifax has also implemented rate reductions as lenders compete for business in a subdued property market.

These coordinated moves follow the Bank of England’s September decision to maintain the base rate at four per cent. Current market data shows average two-year fixed mortgages remain at 4.75 per cent for 75 per cent loan-to-value products.

Sonia swap rates have experienced significant declines, providing the foundation for widespread mortgage rate reductions. Two-year swaps have fallen to 3.5 per cent from 3.72 per cent just one month ago, whilst five-year swaps decreased from 3.8 per cent to 3.58 per cent over the same period.

These interbank lending rates, which reflect market expectations for future interest rates, directly influence fixed mortgage pricing. The downward trajectory suggests lenders anticipate a more favourable rate environment ahead.

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Financial markets have shifted their stance dramatically, now pricing in a two-thirds probability of an additional rate cut before year-end, compared to less than 25 per cent likelihood previously.

This change stems from lower inflation projections and expectations of a less inflationary autumn budget.

Aaron Strutt from Trinity Financial observed that “a mini mortgage price war has broken out, with five of the big banks lowering the price of their fixed rates.”

He noted that whilst two and three-year fixed mortgages remain more competitively priced than five-year alternatives, many borrowers still prefer longer-term payment security.

Strutt added: “There is a strong chance the Bank of England base rate will come down before the end of this year, which should lead to marginally cheaper rates.”

He suggested that when major lenders reduce their prices, other large and smaller mortgage providers typically follow suit.

Investment bank Goldman Sachs has forecast that the Bank of England will reduce the base rate to 3.75 per cent at next week’s meeting. This prediction contrasts with broader market expectations, which had anticipated rates would remain at four per cent until early 2025.