- Homeowners who need to remortgage can get a two-year deal of less than 5%
Homeowners who need to take out a new mortgage can take out a two-year contract below five percent for the first time in months.
Barclays’ move to cut fixed home loans by 0.3 percentage points is fueling hopes that other lenders will also scale back deals below five percent.
It comes after inflation fell much faster than expected, raising hopes that the Bank of England will not raise its key interest rate next month.
Homeowners with 40 per cent equity can now take out a two-year deal at 4.98 per cent through Barclays for a fee of £999.
The six largest mortgage providers, including Halifax, HSBC and NatWest, all now offer mortgage interest rates below five per cent.
Homeowners with 40 per cent equity can now secure a two-year deal at 4.98 per cent through Barclays for a fee of £999 (Stock Image)
Nationwide last week cut its two-year deals to below five percent, but only for new customers who are moving. However, Barclays is the first to offer a two-year deal below this threshold for mortgage refinancing.
According to rates checker MoneyfactsCompare, the average two-year interest rate fix is now 6.19 percent, while the five-year interest rate is 5.78 percent.
Craig Fish, of Lodestone Mortgages and Protection, described the interest rate war as “well underway”.
He added: “More lenders are likely to follow suit. There is a real chance that this side of Christmas we will see a five-year resolution below four per cent, and a two-year below 4.5 per cent.”
Inflation data published on Wednesday showed price increases fell to 4.6 percent in October. Soaring inflation had led markets to predict that base rates would have to keep rising to bring prices back under control.
In response, lenders began taking fixed-rate deals and repricing them at much higher rates.
But while fixed interest rates are now falling, the news will come as cold comfort to the 900,000 homeowners who will have to refinance their mortgages next summer at much higher interest rates. Just two years ago, the average two-year mortgage rate was 2.3 percent.
Justin Moy, of EHF Mortgages, warned that those needing a new mortgage should be proactive to find the best deal. He said: ‘For those who have already completed their new mortgage deal, please do not rely on your lender to keep you informed of these improving rates.’