Two-year mortgage charges to drop as little as 0.75computer amid raging value conflict
Two-year mortgage rates could drop as low as 0.75 percent as major banks enter a price war in a desperate attempt to attract more customers, experts predicted.
Lenders are likely to put pressure on competitors after Rishi Sunak withdrew his stamp duty rebate, causing a fall in demand after months of fiery growth.
Many players have already lowered their interest rates in response and launched the cheapest mortgage deals ever, including a range of offers under 1pc. Experts assume that the competition for preferential tariffs will become even stronger.
Aaron Strutt, product director at Trinity Financial, a broker, said, “In the coming weeks, more lenders will be cutting their rates. The big boys basically – Santander, Halifax, Barclays.
“It could go down to 0.75 [for two-year fixes], that wouldn’t be a surprise. If rates are still falling, five-year rates won’t be far. ”
Nationwide last week launched the UK’s cheapest five-year fixed-rate mortgage ever, at a rate of 0.99 percent. The offer is available to borrowers who are refinancing or moving home with a 40 percent or more down payment and comes with a fee of £ 1,499.
The building society also currently offers the lowest two- and three-year fixed contracts, what Moneyfacts, the data company, calls “fueling the war over mortgage rates”.
It is the youngest lender to drop its rates drastically after the lockdown, a trend that started in April when the Hinckley & Rugby Building Society launched the first under-1 deal since the pandemic hit.
Falling interest rates suggest that banks and building societies are convinced of the UK’s post-crisis recovery and want to take advantage of high property prices.
The deals are so attractive that borrowers have even been willing to accept the prepayment fees to ensure they can secure record rates.
Chris Sykes of Private Finance, another broker, has seen a sharp surge in inquiries from existing clients seeking a debt restructuring, although early repayment fees are common.
He said, “While the fees can be substantial, the interest rates offered below 1 percent represent a significant saving over the life of a mortgage product, and some decent savings could be available compared to interest rates a few years ago.
“We suspect that we will see an increasing number of debt rescheduling requests in the coming weeks as more and more people take advantage of this incredibly favorable situation for borrowers.”
But not everyone would benefit from savings in this situation, he warned, as the cost of early repayment penalties could be substantial.