Barclays cuts mortgage rates after Bank of England interest rate decision

A number of mortgage lenders are cutting rates following the Bank of England’s decision last Thursday to keep interest rates at 5.25%.

Barclays is cutting interest rates on three of its fixed-rate mortgages this week, bringing better news for some borrowers.

It cuts one of the two-year fixed deals from 5.76% to 5.48%, while the other is cut from 5.13% to 4.88%. It is also cutting its five-year fixed contract from 4.9% to 4.85%.

HSBC has also announced that it will be reducing a number of offers from Wednesday 26 June, but has not yet said by how much.

Meanwhile, smaller lender MPowered Mortgages revealed this week that it has cut rates on a number of fixed-rate mortgage deals in response to last week’s interest rate decision.

It’s offering a two-year fixed rate deal at 4.76%, down from 4.87%, for those who pay a £999 fee. Alternatively, for those who don’t want to pay an arrangement fee, rates start at 4.99 percent, down from 5.9 percent.

All five-year fixed rates at MPowered Mortgages have also been reduced for those with a deposit or equity of 25% or more.

Read on

A number of other providers, including Kensington and Virgin Money, have also cut rates on some fixed-rate mortgage deals since last Thursday’s rate vote.

Nick Mendes, of brokers John Charcol, said: “Given that the most recent change in lenders’ prices involved increases, there is now the potential for reductions. We have seen a move but this latest price from HSBC is sure to stimulate the market.

“Competitor price change timings similar to the start of the year will likely be from next week, given upcoming announcements.”

On June 20, the Bank of England’s Monetary Policy Committee (MPC), chaired by Andrew Bailey, voted 7-2 to keep interest rates on hold. The next MPC vote on interest rates is in August, with many analysts anticipating a key rate cut amid falling inflation.

Talking to andRachel Springall, finance expert at Moneyfacts, said: “It’s good to see that some lenders are reducing their fixed mortgage prices, so it’s worth borrowers checking out the latest deals so they don’t miss out.”

Mark Harris, chief executive of SPF Private Clients, said and he believes more lenders may follow suit and start lowering interest rates on some of their fixed-rate offerings.

He said: “If swap rates continue to fall slightly, we would expect other lenders to reprice downward. As confidence grows that the MPC will cut the base rate, borrowers will likely see more dramatic cuts based on that.”

Swap rates are based on long-term forecasts of where the Bank of England interest rate – the interest the Bank charges on its loans to commercial banks – will go in the future.

He added: “However, it is still open to debate whether we will see a cut in August and the ‘higher for longer’ mantra has meant that fixed-rate mortgage prices are currently higher than many expected at the beginning of the year. Borrowers can’t take anything for granted, and if they see a rate they like, they’d be wise to secure it.”

Springall added that it may be some time before all lenders make moves to lower their rates.

“Borrowers will likely want to see more lenders cut fixed rates, but it may be too early to see a wave of rate cuts. It can take several weeks for lenders to price in swap rate volatility, so borrowers may need to be patient.

“Even though there are growing expectations that the Bank of England will cut the base rate in August, some of the biggest lenders may hold tight to making significant cuts on hold until their peers make a move.”

While some borrowers will benefit from lower mortgage rates, the picture can be more complex for existing borrowers or those remortgaging.

Justin Moy, managing director of EHF Mortgages, said: “Barclays got off to a positive start this week (by) passing on swap rate improvements to new home buyers.

“With reductions in their range of acquisitions, other lenders are likely to follow a similar pattern. But keeping the mortgage or existing borrowers paying higher rates will not satisfy most borrowers.”