Major bank cuts mortgage rates as best-buy fixed deals fall to 3.89%

• e-mail

A major high street bank has announced it will be cutting its mortgage rates.

From tomorrow, Barclays will make a number of changes which will include mortgage rates cheaper than 4 per cent.

It follows hot on the heels of Coventry Building Society, which reduced its mortgage rates and released a best-buy two-year fix at 3.89 per cent yesterday. 

Barclays' lowest two-year fix will fall from 4.11 per cent to 3.99 per cent, and will be available to those buying a home with a 40 per cent deposit. 

The deal, which comes with a £899 fee, will mean that someone repaying a £200,000 mortgage over a 25 year term could expect to pay £1,054 a month.

Barclays will do the same with its lowest five-year fix. From tomorrow, it will be reduced from 4.12 per cent to 3.99 per cent, with a £899 fee. 

Cutting: Barclays has released a number of sub 4 per cent deals for borrowers buying with at least a 40% deposit

Someone buying a property with an energy performance certificate rating of A or B could do even better, as they might qualify for one of the bank's 'green' mortgages. 

From tomorrow Barclays' lowest five-year fix on its green home mortgage range will decrease to 3.89 per cent, with an £899 fee.

Those buying with smaller deposits will also benefit from the changes by Barclays. 

For example, its two-year fix for someone buying with a 5 per cent deposit is falling from 5.28 per cent to 4.9 per cent, with no fee attached.

On a £200,000 mortgage being repaid over 25 years that could mean paying £1,157 a month. 

Stephen Perkins, managing director at broker Yellow Brick Mortgages told the news agency Newspage: 'Barclays being the first big six lender to enter the sub-4 per cent fixed rate market is an encouraging development. 

Michelle Lawson, director at Lawson Financial added: 'It’s fantastic to see sub-4 per cent rates again. 

'Whether these drops are temporary or not they are still a borrower's bonanza. 

'It is important for the public to ensure they are organised if wanting a mortgage in the coming months so they can secure these deals with a good broker while they are around.'

Trump tariff u-turn could stop further rate cuts 

Yesterday, investors were betting on four further Bank of England interest rate cuts by the end of the year. 

This would see the base rate fall from 4.5 per cent to 3.5 per cent, amid fears that a trade war could damage economic growth.

This led to Sonia swaps, the inter-bank lending rate which influences fixed mortgage pricing, to fall. 

However, the president last night caved in to bond market pressure and announced a 90-day pause on import tariffs.

As of this morning, five-year swaps were at 3.91 per cent up from a low of 3.63 per cent on Monday. 

Meanwhile, two-year swaps climbed to 3.87 per cent. At the start of the week these had fallen to 3.68 per cent.

Turbulence: Sonia swaps have risen in the aftermath of Donald Trump's tariff u-turn

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: 'Swap rates are almost back to where they started a week ago. What this has taught us is that we live in an uncertain world and you can’t take anything for granted.

'Even though swaps have edged back upwards, lenders continue to release reduced mortgage rates so there are positives. 

However, Harris warned that if Swaps continue their upwards trajectory, it is likely the new mortgage products would become more expensive than today's best rates.

'It’s important not to hang around in the hope of an even better rate that may not come - secure one now,' said Harris. 

'If rates fall again by the time you come to complete, you can ask your mortgage broker to switch you onto a cheaper deal. 

'On the other hand, if rates have edged higher by then, you will be able to stick with that product and be pleased that you acted when you did.'