Mortgage rates eased this week, with Barclays PLC (LON: BARC) among the lenders lowering interest rates in response to declining swap rates.
Data from Moneyfacts showed the average interest rate on a two-year fixed mortgage fell to 5.5197% by Friday, down from 5.5352% the previous week.
On Wednesday, Barclays became the first major lender to cut rates after a series of recent increases, despite the Bank of England’s earlier interest rate reduction this month.
Barclays announced plans to reduce rates on selected mortgage products by up to 0.2%, attributing the decision to a “volatile” period in the swap market, which influences mortgage pricing.
“Barclays has taken a bold step as the first major high street lender to lower mortgage rates in response to recent market changes,” said Nicholas Mendes of broker John Charcol. “With swap rates easing in recent days, it’s encouraging to see a lender swiftly reflect the slightly improving conditions.”
However, despite this short-term decline, the Bank of England warned on Friday that millions of households will face higher rates when they remortgage in the coming years. According to the central bank’s latest financial stability report, 4.4 million homes are set to refinance, following the significant rise in interest rates in recent years.
Mortgage approvals reach highest level in over two years
Mortgage approvals among prospective buyers reached their highest level since August 2022 last month, driven by a decline in borrowing costs.
Data from the Bank of England revealed that 68,300 mortgages were approved for house purchases in October, marking a month-on-month increase of 2,200.
This uptick coincided with a 15-basis-point drop in the effective interest rate on newly drawn mortgages, which fell to 4.61%—the lowest level since May 2023.
Meanwhile, net mortgage borrowing rose by £0.9 billion to £3.4 billion, while overall consumer credit borrowing across the UK edged down from £1.2 billion to £1.1 billion.
“Buyers and sellers are eagerly awaiting signs of when the next interest rate cut might occur,” said Alice Haine, an analyst at Bestinvest.
“While two quarter-point rate reductions have somewhat alleviated borrowing costs, the chancellor’s plans for spending, borrowing, and taxation are likely to drive inflation, which could potentially slow the pace of additional rate cuts.”
