Barclays is making changes that will affect customers from Tuesday, withdrawing its market-leading 4.75% two-year fixed mortgage and 4.93% five-year fix. Financial experts warn the move could "put pressure" on other lenders to raise their own rates. New customers will no longer be able to apply for the two deals from Tuesday, as the 4.75% fix increases to 5.05%, while the 4.93% fix increases to 5.03%.
Experts warn rates may not fall soon
One financial expert told Newspage that the latest withdrawal of mortgage deals suggests rates may not be coming back down "for a while". Aaron Strutt, product and communications director of London-based Trinity Financial, said: "Barclays is pulling the market-leading 4.75% two-year fix and the 4.93% five-year fix. The bank last changed its rates on September 22, so while these deals have not been around for long, they would have been incredibly popular, especially with so many of the bigger lenders mostly offering fixes over 5% now."
Strutt added: "This move puts pressure on lenders like NatWest and Nationwide as some of the remaining lenders offering fixed rates below 5%. NatWest has a five-year fix at 4.98% and Nationwide has a 4.93% two-year fix and a 4.89% five-year fix. Unless there is better global news, particularly regarding inflation and the war between Iran and America, it doesn’t seem like rates will be coming back down for a while, but the market can change quickly. If you want a sub-5% fixed rate you will need to be quick because there probably won’t be any left soon."
Other lenders could follow
The decision to withdraw the market-leading products means other lenders could follow "within days" – with customers being urged to be quick if they want a cheaper rate. Dariusz Karpowicz, director at Doncaster-based Albion Financial Advice, said: "Barclays rarely moves alone. When the lender holding the market-leading 4.75% two-year pulls it, others tend to follow within days, and the sub-5% pool is already shallow. If you are mid-application or eyeing a rate, secure it now."
Karpowicz continued: "Most lenders let you switch down if something better appears later, so there is little downside to locking in early and plenty of risk in waiting a fortnight. Deals are still out there, but they are disappearing faster than most borrowers can gather their paperwork." While the withdrawal of mortgage deals is not unusual, experts say the latest move highlights the uncertainty facing the market.
Competitive pressure moving 'in the wrong direction'
Adam Stiles, managing director of London-based Helix Financial Partners, said: "Barclays are likely pulling rates due to service levels suffering from sourcing top of the list. Whilst this is not unusual, we hope that once we see some stability, multiple lenders will start to drop rates and normal service can resume. The question is of course, when."
Stephen Perkins, Norwich mortgage broker and managing director of Norwich-based Yellow Brick Mortgages, believes the products being pulled by Barclays are "another sign" that the competitive pressure is moving "in the wrong direction". He added: "Most borrowers won't qualify for the very cheapest mortgage on the market, but best-buy deals still matter because they set the benchmark other lenders compete against. When a major lender like Barclays withdraws a 4.75% two-year fix and a sub-5% five-year deal, it is another sign that competitive pressure is moving in the wrong direction. The concern isn't just those two products disappearing. If other lenders follow rather than compete to replace them, borrowers could quickly find the whole market has shifted higher."
With mortgage rates and deals changing quickly, brokers are urging borrowers not to leave it until the last minute to review their options. Elliott Benson, owner at Leeds-based Sett Mortgages, concluded: "Another reason to pick up the phone when your broker is calling you six months before the end of your fix."
