Barclays has confirmed it is cutting rates across 47 mortgage deals from Wednesday, November 11, marking its second round of reductions in less than a fortnight.
The no-fee five-year fix for buyers with a 10% deposit falls from 5.63% to 5.28%, while a five-year remortgage deal at 85% loan-to-value drops from 5.74% to 5.34%. Buyers with a 25% deposit can now fix for five years at 4.98%, down from 5.30%.
Smaller cuts for 5% deposit buyers
Buyers with a 5% deposit get the smallest cuts in Barclays' purchase range, with both of its 95% loan-to-value deals falling by just 0.05%. The bank has also launched a two-year remortgage deal for homeowners with 10% equity, at 5.39%.
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."
Brokers advise securing deals early
Stephen Perkins, mortgage broker and managing director at Norwich-based Yellow Brick Mortgages, said: "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."
Perkins added: "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."
Moustafa added: "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."
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."
Dixon added: "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."
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."
Kohli added: "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."
Justin Moy, managing director at Chelmsford-based EHF Mortgages, said: "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."
