MAJOR lenders have been slashing mortgage rates as banks react to Donald Trump's trade tariffs.
Mortgage brokers have told it's possible we could now see a “full-blown rate war” after two major cut their rates below the 4% mark.
Today, cut its two, three and five-year fixed deals to 3.99%.
It followed Coventry Building Society cutting its two-year fixed deal to 3.89% yesterday.
The moves come after the imposed last week, sending stocks plummeting and creating uncertainty for economies across the globe.
An unexpected side effect of this could be a boost for British home buyers.
That's because the turmoil has led to now expecting more base rate cuts.
The Bank of ‘s base rate helps to influence the rates set by mortgage lenders.
Markets had priced in two base rate cuts this year, but they're now expecting the Bank will need to cut rates four times to avoid an downturn caused by the global uncertainty.
Nicholas Mendes, mortgage technical manager at John Charcol, said if this happens we can expect the base rate to fall from 4.5% to 3.5% this year.
Things are looking uncertain again, however, as Mr Trump yesterday .
This could mean lenders hold back and wait to see what happens before slashing rates.
Stephen Perkins, managing director at Yellow Brick , said: “With Trump pausing the tariffs for 90 days it could make the other lenders pause for thought, but hopefully have started the ball rolling on a surge of rate cuts.”
He said that as Barclays is the first “big six” lender to offer a sub-4% rate, this is an “exciting move” that could be the “catalyst for a full blown rate war”.
Brokers will now be keeping an eye on the swap markets.
That's because lenders use swap rates to determine how they should price their mortgage rates.
Sonia swap rates, which lenders use to price fixed-rate mortgages, have already dropped notably – but they're expected to increase again today.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said she expects mortgage rates to come down in the coming weeks as swap rates have been volatile.
“It traditionally takes a couple of weeks for lenders to respond to swap market volatility, but usually once a notable brand moves to cut mortgage rates, others tend to follow suit,” she said.
John Charcol's Mr Mendes added that he thinks most lenders will “move more slowly” in passing on rate cuts but the “direction of travel is clear”.
“For buyers and remortgagers, this could be a great window to explore options. I would not leave those conversations too late,” he said.
Which lenders have slashed rates?
The first major move came from Barclays today as it revealed it will be cutting its two, three and five-year fixed rates to 3.99%.
Its two-year fix had been priced at 4.11%, while its three-year dropped from 4.32% and the five-year from 4.12%.
Each of these deals are 60% loan-to-value and come with an £899 product fee.
They have a minimum loan of £5,000 and maximum of £2million.
Brokers have also praised the new deal from Coventry Building Society, which has a rate of 3.89% for two-year fixes.
This is at 65% loan-to-value with a £999 fee and a free valuation.
Ms Springall says this is “one of the lowest rates for new customers on the market”.
Other lenders have cut their rates in recent days, although they still remain above the 4% mark.
TSB slashed its two-year fixed rates for house purchases by 0.25% yesterday.
Its remortgage rates for the same length of time reduced by 0.05%.
Earlier this week, MPowered Mortgages cut rates on all its products except its five-year fix by up to 0.31%.
Gen H lowered its two-year fixed rates by 0.15%, while its three and five-year fixes reduced by 0.2%.
West Bromwich Building Society reduced its five-year fixes by up to 0.39%.
Clydesdale Bank has reduced some of its fixed rates by up to 0.64% – but it increased others by up to 0.15%.
Building Society slashed its three-year fixes from 4.9% and 5.1% by 0.15% and 0.11% respectively.
Its two-year fixes also reduced by up to 0.15%.
Some of Metro Bank's fixed-rate mortgages have had their rates cut by 0.2%.
The Co-operative Bank also cut its two-year, three-year, and five-year fixed rates on certain purchase mortgages by 0.14%.
