Four major lenders slash mortgage rates ahead of Bank of England decision this week
FOUR major lenders are reducing mortgage rates ahead of a key Bank of England decision this week.
Barclays, Coventry Building Society and Yorkshire Building Society have all dropped rates on a range of deals.
Barclays has cut rates on purchase and remortgage products by up to 0.25 percentage points.
For example a two-year fix with a loan-to-value (LTV) of 85% will drop from 5.04% to 4.79% with a £899 fee.
The LTV is the ratio of your mortgage compared to the value of your property.
The same deal with no fee is dropping from 5.23% to 4.99%.
Read more on Mortgages
Halifax, part of Lloyds Banking Group which is the UK's biggest mortgage lender, is also slashing rates by up to 0.3 percentage points tomorrow.
Product transfers, home mover deals and some first-time buyer rates are among the reductions.
Meanwhile, Coventry Building Society has made reductions across all its fixed rate deals by up to 0.27 percentage points.
Accord Mortgages, a subsidiary of Yorkshire Building Society, has dropped rates by up to 0.25 percentage points.
Santander, TSB and Co-op have also cut rates over the past week.
Andrew Montlake, managing director at broker Coreco, said that more lenders could follow.
He said: "Where the Halifax goes other lenders tend to follow so these cuts could trigger a chain reaction across the lending community."
The moves come ahead of a key Bank of England (BoE) decision later this week.
The bank's Monetary Policy Committee (MPC) is widely expected to cut the base rate on Thursday.
The MPC last met in December when it decided to hold at 4.75% after lowering it from 5% the month before.
The base rate is used as a lever to control inflation and used by high street banks to set the rates it offers customers on savings and borrowing, including mortgages.
A drop in the base rate does not affect the rate you pay on a fixed deal if you already have one, as you've already locked in the rate for a set period of time.
But those taking out a new mortgage deal may find that a lower base rate is reflected in the fixed rates on offer at the time.
Nick Mendes, from broker John Charcol, said with swap rates falling lenders had more room to lower rates.
Swap rates underpin the price of fixed mortgage deals.
He said: "Policymakers are widely expected to lower rates by 25 basis points at their meeting on February 6.
"While they haven’t explicitly confirmed this, the Bank has strongly implied that it expects to cut rates once per quarter throughout the year."
What's happening with mortgage rates?
Markets are mostly expecting the Bank of England to cut base rate four times this year with inflation around the BoE's 2% target but the UK economy recording low growth.
The BoE lowers base rate to encourage households to spend money, which should see Gross Domestic Product (GDP) rise.
GDP measures the value of goods and services produced in the UK and estimates the size and growth of the economy.
If it is rising steadily, it's the sign of a healthy economy.
Any cut to base rate is also good news for mortgage holders who should see their rates go down.
But bear in mind, when you will see your mortgage rate go down depends based on which type you have.
Those on tracker mortgages, which track base rate, should see it fall pretty quickly, usually the month after any change to base rate.
Standard variable rate (SVR) mortgages also follow base rate but not as closely as tracker deals.
Those with fixed deals don't see an immediate impact, unless their deal is close to ending.
If you are on a fixed deal, make sure you shop around in good time before it ends to avoid the risk of ending up on a higher rate SVR.
Generally, you can lock in a new fixed term mortgage deal around six months before your current one ends.
READ MORE SUN STORIES
You can move to a better deal if one comes along during this time too.
David Hollingworth, from L&C mortgages, said: "Securing a deal a few months ahead will ensure that if there’s any further uncertainty, they have a rate in place but will still allow them to move to a better deal if there are further cuts."
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you're remortgaging and your loan-to-value ratio (LTV) has changed, you'll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home's value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you're nearing the end of a fixed deal soon it's worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal - but compare the costs first.
To find the best deal use a to see what's available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You'll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee - sometimes more than £1,000 - to the cost of the mortgage, but be aware that means you'll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statements.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.