Lenders to slash mortgage rates


Published: Sunday 19th October 2014 by The News Editor

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The battle to tempt mortgage customers with attractive deals will heat up again this week as major lenders put more rate cuts into action.

Barclays is preparing to offer what it said are some of its lowest ever rates, including a three-year fixed rate at 2.29%, a five-year fix at 2.85% and a 10-year fix at 3.49%.

All of these deals are aimed at people with 40% deposits and come with a £999 fee. Barclays is also cutting the rate on its innovative family springboard mortgage, which helps people with only a 5% deposit get on the property ladder by allowing their parents to put some money into a savings account which is then linked to the mortgage.

The savings money is later released back to their parents with interest, provided that the mortgage payments are kept up to date.

The rate on a three-year fixed family springboard deal, which has no application fee, is to be slashed from 3.79% to 2.99%.

The bank is also cutting rates on deals aimed at people with deposits of 10%, 15%, 20% and 30% in what will be the seventh consecutive round of reductions to its range. Barclays said its “never seen before” rate cuts will come into place early this week and they are likely to be around for only a limited period.

Meanwhile, a new 0.99% deal from HSBC will be launched tomorrow. HSBC has said the product, which is available for borrowers with a 40% deposit, has the lowest rate it has ever offered.

The 0.99% deal is in effect a 2.95% discount off HSBC’s 3.94% standard variable rate (SVR), which lasts for two years.

In theory, HSBC could decide to increase its SVR within the two-year discount period, which would mean the rate would move above 0.99% but the borrower would still get a rate of 2.95% below whatever the new SVR rate was for the two years after initially taking out the deal.

For borrowers who would prefer to have a fixed deal, HSBC is also offering a product at a fixed rate of 1.49% for two years. Both the fixed and the SVR deals have a £1,999 booking fee.

The deals are the latest in a string of rate cuts which have been made in recent weeks as lenders strive to make their ranges more appealing.

Experts have put the new battle for mortgage holders’ business down to lenders looking to meet end-of-year targets as well as trying to play catch up after the introduction of stricter mortgage lending rules earlier this year, which caused some disruption to the market.

A recent Bank of England report said that mortgage availability had shrunk back over the summer, but also that lenders expect the availability of home loans to widen again in the coming months as they look to meet their market share objectives.

Swap rates, which lenders use to price their loans, have also been falling recently, adding further fuel to the mortgage price war.

The polished-up deals could provide a good window of opportunity for many borrowers, who have been warned by lenders to start preparing now for the prospect of interest rates eventually rising, pushing up borrowing costs.

These preparations could involve borrowers looking to switch to a better deal than the one they are currently sitting on.

Published: Sunday 19th October 2014 by The News Editor

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