Barclays is making changes this week (Image: Peter Fleming via Getty Images)
Barclays has revealed it is reducing rates across 47 mortgage products tomorrow, representing its second wave of cuts in under a fortnight. From Wednesday, November 11, Barclays’ no-fee five-year fix for purchasers with a 10% deposit decreases from 5.63% to 5.28%, while a five-year remortgage product at 85% loan-to-value drops from 5.74% to 5.34%.
Purchasers with a 25% deposit can now secure a five-year fix at 4.98%, down from 5.30%. Nevertheless, purchasers with a 5% deposit receive the smallest reductions in Barclays’ purchase range, with both of its 95% loan-to-value products falling by merely 0.05%.
The bank has also introduced a two-year remortgage product for homeowners with 10% equity, at 5.39%. One broker told Newspage that 5% deposit purchasers were “one small price fall away from owing more than the home is worth”.
Barclays cuts mortgage rates
Harry Goodliffe, director at Winchester-based HTG Mortgages, said: “A 0.05% cut is a bank saying “not for us”. Barclays has taken 0.35% off its 10% deposit five-year fix and basically ignored the 95% deals, because a buyer with a 5% deposit is one small price fall away from owing more than the home is worth and the bank carries that risk.
“Government keeps telling first-time buyers that small deposits are the answer and lenders keep pricing them as the problem. Two rounds of cuts in under a fortnight tell us lenders are now fighting for business, so I expect more to follow before Christmas, which would be very welcome.”
Harry Goodliffe (Image: Newspage)
Secure a deal and review
Stephen Perkins, mortgage broker and managing director at Norwich-based Yellow Brick Mortgages, explained: “Borrowers with a 5% deposit generally pay more because the lender is taking more risk and has a much smaller equity cushion if house prices fall. That is why 95% mortgages do not always benefit from the same aggressive repricing as lower-LTV deals, even when a lender is cutting across the range.
“Barclays making a second round of cuts in less than two weeks is encouraging and shows competition is still strong, but I would not wait to buy purely in the hope rates keep falling. Secure a suitable deal when you are ready, then keep reviewing it before completion. The same applies to remortgaging: start looking several months early rather than trying to guess the bottom of the market.”
Nouran Moustafa, practice principal and Independent Financial Adviser at Roxton Wealth, said: “Barclays cutting rates for the second time in less than two weeks is encouraging, particularly for borrowers with 10% to 15% deposits. The smaller reductions for 5% deposit buyers reflect the greater risk lenders associate with higher loan-to-value mortgages.
Nouran Moustafa (Image: Nouran Moustafa/Newspage)
“Smaller deposits generally mean less competitive pricing. I expect further selective reductions if swap rates and wholesale funding costs remain favourable, but I wouldn’t assume a straight downward trend. As for two versus five years, it’s about certainty versus flexibility.
“A two-year fix offers an earlier opportunity to review rates, while five years protects against future increases. Waiting to buy purely because you hope mortgage rates will fall is a gamble. The property price could move too. If you’re remortgaging, start reviewing your options around six months before your deal expires. Don’t leave your biggest monthly financial commitment until the last minute.”
Welcome, but no guarantee
Tracey Dixon, buy-to-let mortgage specialist and owner of Cardiff-based Pure Mortgage and Protection, said: “Saving a 5% deposit is hard enough without watching the biggest rate cuts go to buyers with deeper pockets. Lending at 95% carries more risk because there is less equity to cushion a fall in property values.
“That helps explain higher pricing, although the size of individual cuts also reflects lenders’ appetite for business. These cuts are welcome, but they don’t guarantee rates will keep falling. Fixed rates respond to funding costs and market expectations, so the next move can go either way.
“Choosing between two and five years should start with your plans, not a crystal ball. A two-year fix gives an earlier opportunity to review, but brings refinancing costs and the risk of a higher rate sooner. Five years offers longer payment certainty, although early repayment charges could prove costly if your circumstances change. The right deal needs to fit your life as well as your budget.”
Rohit Kohli, senior mortgage adviser for residential and commercial at Romsey-based The Mortgage Stop, said: “Any cut is good news for borrowers and it’s another reminder that the market doesn’t simply follow the Bank of England base rate. Lenders also price on funding costs and competition.
“Is it fair that 5% deposit buyers get the smallest cuts? Probably not, but it’s always been this way. The more you borrow, the more you pay. Higher loan-to-value lending carries the most risk for the lender and they price for it.
Rohit Kohli (Image: Rohit Kohli/Newspage)
“Smaller deposit, bigger risk, higher price. Will rates keep falling? Don’t assume so. This year has shown they won’t fall in a straight line and with so much political and economic uncertainty globally, that isn’t going away.
“If you’re buying or remortgaging, I wouldn’t hesitate. Secure a rate as soon as you can, as long as it’s affordable. You can wait for cheaper rates, but that doesn’t mean you’ll be able to afford the mortgage. If house prices rise while you wait, you’ll need a bigger deposit or a bigger loan. There’s no right time to buy, only the right time for you.”
Justin Moy, managing director at Chelmsford-based EHF Mortgages, stated: “Those with the smallest deposits often receive the smallest rate cuts, given that the product range remains one of the most risky, with the highest loan-to-value, but it is also necessary to trade off larger cuts at other price points, especially more popular deposit points such as 20/25%.
“It’s great to see rates coming back a little, as the conflict has seemed more settled over the last few weeks and this has also seen the price of oil reduce sharply too. Still, every reason to start as soon as you can on your renewal, as the situation can change very quickly, and both rates and inflation could increase with little notice.”
Ensure our latest headlines always appear at the top of your Google Search by making us a Preferred Source. Click here to activate or add us as a Preferred Source in your Google search settings.
