Barclays slashes mortgage rates on fixed deals ahead of Bank of England decision

Barclays Bank branch

Barclays has announced it will be reducing interest rates on a selection of its fixed mortgage product range this week.

The changes will impact the bank’s two and five-year deals on its residential purchase range and will come into effect on Wednesday, May 8.

Amongst the reductions is Barclays’ Two Year Fixed Rate at 85 percent Loan to Value (LTV) mortgage with an £899 product fee, which will drop from 5.23 percent to 4.99 percent.

Meanwhile, its Five Year Fixed Rate mortgage with the same terms will be reduced from 4.92 percent to 4.78 percent.

The move comes ahead of the Bank of England’s Monetary Policy Committee meeting on Thursday to determine whether the Base Rate will rise, fall, or remain the same.

The Bank of England

The full list of rate reductions includes:

• Two Year Fixed £899 product fee, 85 percent LTV, minimum loan £5,000, maximum loan £2million, will decrease to 4.99 percent (from 5.23 percent)
• Two Year Fixed £0 product fee, 85 percent LTV, minimum loan £5,000, maximum loan £2million, will decrease to 5.18 percent (from 5.57 percent)
• Five Year Fixed £899 product fee, 85 percent LTV, minimum loan £5,000, maximum loan £2million, will decrease to 4.78 percent (from 4.92 percent)
• Five Year Fixed £0 product fee, 85 percent LTV, minimum loan £5,000, maximum loan £2million, will decrease to 4.95 percent (from 5.13 percent).

Speaking to the Newspage news agency, Dariusz Karpowicz, director at Albion Financial Advice commented: “Barclays’ decision to lower rates on its fixed-rate Purchase deals, particularly at higher loan-to-value levels, is a refreshing departure from the recent trend of rate hikes among mainstream lenders.”

However, he noted: “While this reduction brings welcome news for potential homebuyers, I’m hesitant to anticipate a similar trend from other lenders amidst the current economic uncertainty.

“It’s certainly a breath of fresh air, but whether it will influence other lenders remains uncertain.”

Hannah Bashford, director at Model Financial Solutions said: “Barclays setting out their stall as a lender that wants to lend and help to stimulate the housing market.

“Not a great day for existing borrowers, with other lenders increasing their existing borrower rates and Barclays focusing on purchases, but any decrease in rates at this point is very welcome.”

Justin Moy, managing director at EHF Mortgages said this move is “surprising” and mirrors a strategy adopted by many lenders back in January to stimulate the home-moving market.

While Mr Moy anticipates other high street lenders may follow suit, he warned: “We may see remortgage products increase to offset these discounted deals. Overall, it’s a positive move from Barclays that is likely to attract a lot of business in the short term.”

When will the Bank of England lower interest rates?

The Bank of England Base Rate increased 14 consecutive times since 2021 before reaching 5.25 percent in August 2023, where it has remained frozen ever since.

The incremental increases sent mortgage rates spiralling over the past two years, however, markets are widely anticipating the start of Base Rate reductions this year, with the first potentially occurring as early as this week.

Others suggest it may take place later in the summer or the second half of the year.

Steve Matthews, investment director, liquidity at Canada Life Asset Management, said: “Looking ahead to Thursday’s Bank of England interest rate decision, we expect an 8-1 vote in favour of no cut, with Swati Dhingra being the lone outlier.

“While there’s optimism within the Monetary Policy Committee that inflation will close in on the all-important two percent as the fuel effect falls out, the Bank of England will be deeply aware of the second-round inflation effect.

“Rather than patting itself on the back when the two percent figure is hit, it will require clear evidence that inflation is under control rather than simply hitting a target.

“We maintain our view that a first cut of 25bps in August is still the most likely scenario.”

The Bank of England’s Monetary Policy Committee will announce its decision around midday on Thursday, May 7.