The New Year mortgage price war has stepped up a gear as more lenders slash rates to attract borrowers.
Mortgage rates continue to hurtle downwards in early 2024, with Co-operative Bank the latest lender to announce cuts, taking the best fixed deals further below 4 per cent.
A total of 22 lenders have announced rate cuts since the beginning of the year, according to data compiler Moneyfacts, including NatWest, First Direct, TSB and HSBC.
The Co-operative Bank is slashing rates across its two, three and five-year fixed-rate products by up to 1.07 percentage points.
Heading down: A raft of lenders have announced rate cuts over the past week, including NatWest, First Direct, TSB, HSBC and now Co-op Bank
Co-op Bank’s cuts include a number of new best buys and will benefit both new and existing customers buying or remortgaging.
From tomorrow, Co-op Bank’s existing customers will be able to secure two-year fixed rates starting from 3.84 per cent and five-year fixed rates from 3.74 per cent.
New customers will be able to secure a five-year fix, with rates starting from 3.84 per cent and two-year fixed deals starting from 4.22 per cent.
The catch is that Co-op’s best rates are reserved for those buying or remortgaging with at least a £750,000 mortgage, but its next best deals aimed at those with more typical borrowing circumstances are only marginally higher.
Its two-year fix for mortgages under £750,000 is 4.34 per cent and its five-year fix is 3.89 per cent – both come with a £999 product fee.
Nicholas Mendes of mortgage broker, John Charcol, says: ‘Co-op has made a statement of intent to kick off the year with some impressive rate pricing.
‘A five-year purchase or remortgage at 3.84 per cent makes it the new market leader.
‘It’s also great to see a lender offer the same deals for all clients and not reserved for just purchases as we have seen in recent weeks from other lenders.
‘Also, their product transfer rates (for existing customers) are equally impressive for existing clients.
‘What a way to start the week, and who knows what we could see happen over the next few days. I was expecting repricing downwards but not this quickly.
However, Chris Sykes, technical manager at mortgage broker Private Finance warns that people will likely need to act fast to secure a deal with the Co-op.
‘I doubt these will be available for long as the Co-op often takes a bit of a tap-on, tap-off approach to their rates.
‘I have heard this is for a specific tranche of funds that they have secured, so the message will be to get them while you can.’
He added: ‘But it’s really good to see the continued reduction of rates and also the first sub-4 per cent two-year fix.
‘This was a very unexpected move to go under what many lenders are benchmarked against as cost of funds. Understandably just for existing customers.’
Why are mortgage rates falling?
The mortgage price battle stepped up a gear before Christmas and this has followed through into the New Year.
But it hasn’t just been in recent weeks that mortgage rates have fallen.
Average rates across two-year and five-year fixed mortgages fell for a fifth consecutive month, according to Moneyfacts data and they’re now at the lowest levels in over six months.
Since August, average two-year fixes have fallen from 6.86 per cent to 5.81 per cent while the average five-year fixed rate has dropped from 6.37 per cent to 5.42 per cent.
Mortgage lenders have been slashing rates in the expectation of the Bank of England cutting base rate.
In recent months, forecasts for where the base rate would eventually peak have fallen from a high of 6.5 per cent to 5.25 per cent.
While the Bank of England has held the base rate at 5.25 per cent on three consecutive occasions since September, markets are increasingly confident it will be cut this year.
Financial market expectations see the Bank of England cutting rates six times in 2024, taking them from a 15-year high of 5.25 per cent today to 3.75 per cent by Christmas. Some analysts are urging caution on these forecasts, however, suggesting market expectations have run ahead of themselves.
Average rates across two-year and five-year fixed mortgages fell for a fifth consecutive month
Best fixed-rate mortgage deals
The lowest rates on offer are typically aimed at homebuyers with the biggest deposits and homeowners remortgaging with the largest amounts of equity.
Those with at least a 40 per cent deposit or equity will potentially be eligible for the cheapest rates on offer.
However, this isn’t necessarily the case with Co-op Bank. For example, its market leading cheapest two-year fixed rates are aimed at buyers and remortgagers with at least 20 per cent deposits or equity.
We have taken a look at the best deals on the market based on a 25-year mortgage for a £290,000 property – the current UK average house price according to the ONS.
To check up-to-the minute rates based on your own circumstances, use This is Money’s mortgage finder and best buy tables.
Bear in mind that the mortgage deals below are best in terms of having the lowest rate. They may not be the cheapest deal overall when arrangement fees are also factored in.
The deals below are aimed at new customers. Existing customers may be able to secure a cheaper rate by switching internally to a deal with their current lender.
Buying with bigger deposit mortgages
Two-year fixed rate mortgages
First Direct has a two-year fixed mortgage at 4.54 per cent with a £490 fee at 60 per cent loan to value.
The Co-operative Bank has a two-year fixed rate at 4.34 per cent with a £999 fee at 80 per cent loan to value. (Available from January 9)
Five-year fixed rate mortgages
The Co-operative Bank has a five-year fixed rate mortgage at 3.89 per cent with an £999 fee at 60 per cent loan to value. (Available from January 9)
First Direct has a five-year fixed rate at 3.99 per cent with a £490 fee at 60 per cent loan to value.
10-year fixed rate mortgages
First Direct has a 10-year fixed rate at 3.99 per cent with a £490 fee at 60 per cent loan to value.
Remortgaging with higher equity
Two-year fixed rate mortgages
The Co-operative Bank has a two-year fixed rate at 4.34 per cent with a £999 fee at 80 per cent loan to value. (Available from 9 January.)
TSB has a two-year fixed product at 4.44 per cent with a £994 fee at 60 per cent loan to value.
Five-year fixed rate mortgages
The Co-operative Bank has a five-year fixed rate at 3.89 per cent with an £999 fee at 60 per cent loan to value. (Available from January 9)
HSBC has a five-year fixed-rate at 3.94 per cent with a £998 fee at 60 per cent loan to value.
10-year fixed rate mortgages
HSBC has a 10-year fixed rate at 3.99 per cent with a £999 fee at 60 per cent loan-to-value.
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