Lenders try to attract business as BoE rates stay steady and some profits suffer
Barclays has announced a reduction in the mortgage interest rates of several fixed-rate mortgage products, as it tries to attract home buyers amid a broader environment of declining profits and economic uncertainty.
The mortgage rate cuts include a decrease of up to 0.39 percentage points for residential mortgage borrowers, targeting home buyers with a minimum of 15% cash deposit. For instance, some two-year fixed-rate mortgages at 85% loan-to-value (LTV) have been lowered from 5.23% to 4.99%, accompanied by an £899 fee. Similarly, the fee-free option has been reduced from 5.57% to 5.18%. Additionally, the bank has cut its five-year fixed-rate from 4.92% to 4.78%, also at 85% LTV, with the same fee structure. The no-fee variant has seen a reduction from 5.13% to 4.95%.
Guilford-headquartered MPowered Mortgages has also made cuts to its mortgage rates, by up to 0.65 percentage points, targeting both the remortgage and home purchase sectors. This includes what it describes as a new market-leading three-year fixed rate for remortgaging at 4.49% with a £999 fee, aimed at borrowers with at least 40% equity. Their purchase rates and fee-free options have been similarly adjusted, enhancing their competitive position in the market.
Barclays reported a significant 12% drop in its first-quarter profits, with pre-tax profits falling to £2.3 billion from £2.6 billion in the previous year. This downturn was largely attributed to the higher UK interest rates which have subdued the demand for mortgages and other loans, as well as a general downturn in the economic landscape affecting its investment banking operations. Loan and advance figures to customers also dipped by 1%, indicating a reduced appetite for borrowing amid these higher rates.
Barclays has responded to these challenges not only by adjusting mortgage rates but also by strategically aiming to offer a higher share of high LTV mortgages in future, potentially to buffer against the declining demand and stabilize its loan book. The bank is facing increased competition and a need to offer higher interest rates to savers, which further pressures its income.
