Atom and Paragon Bank have joined wider lenders in reducing mortgage rates this week to offer customers more competitive deals.
Atom bank, the UK’s first app-based bank, has reduced its mortgage rates by up to 0.3 percent, plus all Near-Prime rates by 0.2 percent.
Paragon Bank has reduced rates on five-year fixed-rate buy-to-let mortgages by up to 0.7 percent, in addition to lowering its reference rate and making changes to the minimum experience and maximum loan term criteria.
Here’s a round-up of the challenger banks’ latest reductions.
Atom bank
Atom bank’s reductions are particularly competitive at high Loan To Value (LTV), as the digital lender pledges to continue to help borrowers with smaller deposits.
Prime five-year fixed rates are now 4.94 percent to 90 percent LTV, and 5.19 percent to 95 percent LTV. Its two-year fixed rates are now 5.44 percent to 90 percent LTV, and 5.79 percent to 95 percent LTV. According to Atom, all these products come with no fee and a free valuation.
Over the last six months, the digital bank said it has continued to reduce rates on its Prime and Near Prime range while focusing on reducing application to offer times, “further underlining” its commitment to passing on value to customers and “enabling more people to own their own home”.
Near-Prime rates refer to the deals offered to people with less-than-perfect credit scores.
Richard Harrison, head of mortgages at Atom Bank commented: “The recent statistics highlighting that lending to first-time buyers was down by a fifth in 2023 demonstrates the plight of many who are struggling to get onto the housing ladder.
“We know how important this sector is, so we’re delighted to be offering them further rate cuts with a slick digital experience that can reduce the hassle often associated with an application.
“Equally, we know that the pressure that has been put on household budgets means that increasing numbers of would-be borrowers are more likely to fall within the Near Prime category. So we want to continue our commitment to supporting this area of the market by cutting rates across the range.”
Mr Harrison added: “Having made a number of rate reductions in recent months, we remain steadfast in our commitment to ensure we offer excellent value and a simple, speedy process to help more people achieve their home-buying aspirations.”
Paragon Bank
Rates on Paragon’s five-year fix, which comes with a five percent fee, have been reduced from 5.2 percent to 4.5 percent for the purchase or remortgage of single self-contained properties.
For energy-efficient homes with an EPC rating of A to C, the rate is 0.05 percent lower at 4.45 percent, while Houses in Multiple Occupation (HMOs) and Multi-unit blocks (MUBs) can be mortgaged at 4.7 percent.
Paragon has also extended its maximum loan term from 25 to 35 years while reducing the amount of experience buy-to-let landlords are required to have for HMO and MUB applications, down from a minimum of three years to two.
Other rate cuts include a 0.55 percent reduction, from 5.94 percent to 5.39 percent, on a five-year fixed-rate nil-fee product that comes with £750 cashback. Paragon’s EPC C and above loan is again 0.05 percent lower at 5.34 percent and increases to 5.59 percent on HMOs and MUBs.
These products are available at up to 75 percent LTV for landlords applying through limited company structures or in personal name in England, Scotland and Wales.
Louisa Sedgwick, commercial director at Paragon Bank, said: “It’s great to get the year off to a positive start by taking up to 70bps off our 75 percent LTV five-year fixed-rate mortgages. With a mix of five percent and nil fee options, some with £750 cashback, we’re aiming to offer products that work for more landlords.
“This is also a key driver in our decision to reduce our reference rate from 5.5 percent to five percent.
“We’ve listened to brokers who have told us that the most important consideration for their clients when sourcing mortgages is affordability so calculating ICRs at a lower rate will help with this. Additionally, we have eased some of our criteria across the maximum loan term and minimum experience for HMO and MUB applications.”
Average mortgage rates for two and five-year fixes have been falling for five consecutive months, and some lenders are currently offering rates as low as 3.99 percent.
Rachel Springall, a finance expert at Moneyfacts, said: “The consecutive reductions to the overall average two and five-year fixed mortgage rates will be of great relief for borrowers looking to refinance this year. The volatility surrounding mortgage rate pricing eased, as the average mortgage shelf life rose from 17 days to 21 days, the highest figure recorded in over six months. There are big expectations for fixed mortgage rates to fall in the coming weeks, so some borrowers may choose to wait patiently for the right time to change their deal or buy their first home.”
However, she added: “Consumers would be wise to seek advice to assess the latest offers based on true cost and not be swayed by a headline-grabbing rate.”
