
The cheapest fixed rate mortgages have edged lower once again thanks to another wave of rate cuts by lenders this week.
Barclays, Santander, Halifax and Lloyds Bank are the latest to slash rates, taking the cheapest deals as low as 3.7 per cent.
Santander and Halifax are offering two-year fixes at 3.79 per cent for those moving home with at least a 40 per cent deposit.
However, Lloyds Bank goes one better than all the rest offering the chance to get a rate as low as 3.69 per cent on a two-year fix, with a £999 fee.
The catch? Buyers will need to have a Club Lloyds bank account to get it.
On a £200,000 mortgage being repaid over 25 years, it would mean paying £1,021 a month.
Your browser does not support iframes.
In terms of five-year fixes, Lloyds Bank is offering 3.84 per cent to borrowers with a Club Lloyds account.
For those who don’t have Club Lloyds account, the bank is offering a 3.79 per cent two-year deal or a five-year fix at 3.94 per cent.
From tomorrow Barclays will also get in on the action with a 3.79 per cent two-year fix and a five-year deal at 3.91 per cent, both with an £899 fee.
Barclays has also undercut some of its competitors by launching a 3.75 per cent two-year fix for property purchases if they are a premier banking customer.
For those buying or remortgaging with smaller deposits or equity, rates are not that much higher.
For example, someone remortgaging with 25 per cent equity in their home can now bag a 3.94 per cent two-year fix with TSB or a 3.96 per cent five-year fix with Santander.
And someone buying with a 15 per cent deposit can get a 4.04 per cent two-year fix with Santander with just a £749 fee.
On a £200,000 mortgage being repaid over 25 years, that would equate to paying £1,061 a month.
Will mortgage rates fall further?
Inflation is one the most important metrics that people should keen an eye on as that will have a major impact on the future direction of interest rates.
The Bank of England sets interest rates to try to keep consumer prices inflation at the Bank and Government’s 2 per cent target.
At present, inflation is above that target. It rose to 3.6 per cent in the 12 months to June, rising from from 3.4 per cent in the 12 months to May.
However, the Bank of England will also closely monitor other aspects of the economy and take that into account when making its rate decisions.
The UK economy contracted in May by 0.1 per cent and the jobless rate rose to 4.7 per cent. Payrolls in the private sector contracted for the thirteenth straight month.
If inflation is deemed the biggest threat, then the Bank of England is more likely to keep rates higher for longer.
The theory is that higher interest rates lifts the cost of borrowing for individuals and businesses and thus reduces demand for it, slowing the flow of new money into the economy and applying the brakes.
If the wider economy continues to struggle and economic growth and rising unemployment becomes the greater concern then interest rates may be cut faster than expected.
Cutting interest rates tends to lower the cost of mortgage rates and other borrowing and increases demand, pushing the accelerator on the economy.
Mortgage broker Aaron Strutt of Trinity Financial thinks there is still room for rates to fall a little from here.
‘Mortgage lenders are still cutting their rates despite the higher inflation figures,’ said Strutt.
‘Even with everything that’s going on with the economy and global affairs it still seems like rates are heading down.
‘I would not bet against rates being closer to 3.5 per cent over the coming months, but as we have seen so many times before almost anything can happen.
‘If you get the chance to take a rate anywhere near 3.75 per cent you are doing very well.’
Further to go: Mortgage broker Aaron Strutt of Trinity Financial thinks there is still room for rates to fall a little from here
What about for households remortgaging?
An estimated 900,000 borrowers will reach the end of their mortgage deal during the second half of this year, according to UK Finance, the trade association for the banking and finance industry.
Many households will be coming off rates between 1 and 2 per cent, locked in prior to interest rates rocketing upwards in 2022 and 2023.
While they face far higher rates today, the blow will somewhat be softened by recent cuts.
Currently the lowest remortgage rates for someone fixing for five years are with Barclays and HSBC, both offering deals at 3.86 per cent.
Those prepared to fix for two-years can do slightly better with HSBC offering a 3.83 per cent deal.