Geopolitical tensions in the Middle East push swap rates higher, prompting lenders to reprice
Barclays has announced rate reductions of up to 0.66% across its residential purchase and remortgage ranges, effective from tomorrow. At the same time, Nationwide is increasing selected fixed and tracker rates by up to 0.35%.
Barclays' two-year fixed rates at 60% loan-to-value (LTV) will start from 4.25% with an £899 product fee and 4.45% fee-free. The largest reductions are concentrated at higher LTV bands. At 85% LTV, two-year fixed rates have been cut by 47 basis points (bps) to 4.61% with an £899 fee, and by 62bps to 4.78% fee-free. At 90% LTV, two-year fixes fall by 61bps to 4.64% with a fee and by 66bps to 4.79% without. At 95% LTV, a fee-free two-year fix has been reduced by 39bps to 5.11%.
Three-year fixed rates at 90% and 95% LTV have seen smaller reductions of up to 0.23%, dropping to 4.99% and 5.09% respectively, both carrying an £899 fee. Selected five-year fixed rates at 85–95% LTV have been trimmed by up to 11bps.
Green Home mortgage rates on selected two- and five-year fixed products are also reducing by up to 0.66%. Within Barclays' remortgage-only range, two-year fixed rates at 60% LTV have been cut by 15bps, now available from 4.39% on a Premier product and 4.42% on the standard product, both with a £999 fee. Selected two- and five-year existing customer Reward rates have also been reduced by up to 11bps.
"Mortgage lenders have continued to make their rates more competitively priced in recent weeks but the pace of fixed-rate price reductions has slowed significantly," noted Aaron Strutt (pictured right), product director at Trinity Financial. "More widespread conflict has ticked up in the Middle East – as a result, swaps have climbed and some of the lenders are repricing again."
Nationwide's increases, also effective from tomorrow, apply to first-time buyer, home mover, existing customers moving home, and remortgage products.
"After the wave of cuts earlier this month, lenders are adjusting to a change in market conditions," said Nicholas Mendes (pictured right), mortgage technical manager at John Charcol.
"The driver is funding costs. Swaps briefly dipped below 4% across the one-to-five-year range at the start of July, which fuelled the round of cuts borrowers enjoyed just a week ago, but events in the Middle East have pushed them back up, with two-year swaps now at 4.179% and five-year at 4.260%. Lenders price off swaps, so some repricing was to be expected, and it's worth keeping perspective."
Strutt noted that Nationwide had featured prominently at the top of best-buy tables for some time. "Nationwide has been topping the best buy tables for quite some time and even though we know the cost of funding is going up, it is a shame to see the lender raising its fixes as much as 0.35%," he said.
"The building society's current two-year fix of 4.19% is rising to 4.54% and the 4.26% five-year fix is going up to 4.61%. This move will more than likely mean other rates will be going up soon, so it is worth booking or securing a mortgage rate rather than hold on to see if they come down over the coming weeks.
"Just as we thought sub-4% fixes were in sight, the trouble in Iran has started again and borrowing costs have gone up. Economic and political stability is the key to cheap rates at the moment."
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