Barclays is to launch a new lowest mortgage rate on the market, just 24 hours after Nationwide released the first sub-3.75 per cent deal.
From Wednesday, Barclays will launch a five-year fix at 3.71 per cent for those buying their home with a 40 per cent deposit.
The deal will come with an £899 fee, and is cheaper than Nationwide’s 3.74 per cent five-year fix, launched on Tuesday morning.
An even cheaper option at 3.70 per cent is available but only for premier customers of the bank.
Brokers said that lenders were “gently easing pricing as they compete for business.”
Nationwide still offers the cheapest two-year deal on the market at 3.89 per cent.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said “No sooner does one lender offer a sub-3.75 per cent five-year fix, then another joins the fray, with Barclays launching a market-leading 3.71 per cent.
“The clear direction of traffic for mortgage rates is downwards, with lenders gently easing pricing as they compete for business.
“We don’t expect any dramatic reductions going forward but nevertheless, subtle improvements in rates will make life easier for borrowers.”
Mortgage rates have been going downwards for months now on the expectation of more Bank of England interest rate cuts.
Rates follow Swap rates, which are based off long-term prediction for the future path of interest rates.
Though rates are falling for most customers, the cheapest deals are all for those purchasing their homes with large deposits.
Those who are remortgaging or have smaller deposits are typically getting worse rates.
The average five-year fixed residential mortgage rate is 5.09 per cent, according to Moneyfacts, though this was 5.21 per cent at the start of September.
Despite recent cuts though, some economists have warned that rates may be starting to become a little “optimistic” and there is a risk that they may have to go back upwards if the Bank of England is less hasty than expected in dropping rates.
Aaron Strutt, of broker Trinity Financial, said: “As we have seen quite recently there are no guarantees when it comes to mortgage rates. The consensus is that rates will continue to edge down but they can go up very quickly.”
