Barclays has launched a five-year fixed deal for 3.99 per cent for those purchasing with 40 per cent deposit or equity. It will be available tomorrow (13 February) and has a product fee of £899.
It follows Santander launching both a two and five-year fixed rates at 3.99 per cent at 60 per cent LTV (loan to value), making it the only lender offering sub-4 per cent rates on two-year fixes.
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Read MoreExperts have welcomed the news and expect more providers to follow in cutting rates.
“The shame of it is that lenders can clearly offer cheaper rates but they hold off until one of their rivals offers a cheaper deal.
The cuts come following the Bank of England’s decision to reduce interest rates to 4.5 per cent last week. When interest rates fall, mortgage rates tend to follow.
When setting these rates, lenders take multiple elements into account, including their service levels and overall market conditions.
Simon Gammon, managing partner at Knight Frank Finance, said: “This is about competition and confidence. Swap rates haven’t moved much since the Bank’s decision to cut the base rate last week, but the lenders are clearly growing more confident about the direction of travel when it comes to the borrowing costs.
There are now three lenders offering sub-4 per cent rate for five-year deals. Lloyds is offering a rate of 3.89 per cent but requires customers to sign up to its Club Lloyds scheme.
It has said that from today (12 February) it will be slashing rates on multiple mortgages by up to 0.36 percentage points, though there are still cheaper deals available on the market.
However, some experts think the decline in two-year fixes won’t last long.
“However, with two-year swaps priced only marginally below this level, there is limited scope for other lenders to comfortably follow suit. As such, I do not expect many competitors to replicate this move. Without wider market support, this deal is unlikely to remain available for long – so it’s worth acting swiftly when opportunities like this arise.”
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