Barclays is reducing rates across 47 mortgage products from Wednesday, November 11, marking its second wave of cuts in under a fortnight. The no-fee five-year fix for purchasers with a 10% deposit drops from 5.63% to 5.28%, while a five-year remortgage product at 85% loan-to-value falls from 5.74% to 5.34%. Purchasers with a 25% deposit can secure a five-year fix at 4.98%, down from 5.30%.
Smaller cuts for 5% deposit buyers
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%.
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."
Brokers respond to the cuts
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."
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."
What the cuts mean for borrowers
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."
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."
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%."
Brokers expect further reductions before Christmas, but caution that rates may not keep falling. Perkins advised: "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."
