Barclays has become the largest UK bank to reduce its mortgage rates to below 4%, following the financial volatility triggered by the US trade tariffs. The move, which sees some mortgage deals now priced at under 4%, marks a significant shift in the market, with experts predicting that other lenders may soon follow suit.
As the first major lender to offer fixed-rate deals under 4%, Barclays’ decision has sparked speculation among brokers about whether this move signals the beginning of a price war in the home loans market. This follows similar actions by smaller lenders earlier in the week, with Barclays making adjustments of up to 0.38 percentage points on some of its mortgage deals. The changes are set to take effect on Friday.
Two- and five-year fixed-rate mortgages, which were previously priced at 4.11% and 4.12%, will now be available at a more competitive 3.99% for borrowers with a large deposit. While fixed-rate mortgages below 4% have appeared intermittently over the last few months, two-year deals under this threshold had not been widely available in recent weeks—until Coventry Building Society launched one on Wednesday.
Stephen Perkins, managing director at Yellow Brick Mortgages, described Barclays’ move as encouraging. He raised the question of whether the bank’s decision to cut rates was made before or in response to the recent developments regarding US tariffs. The US President’s decision to pause certain trade tariffs for 90 days, excluding China, on Wednesday prompted further speculation on the potential for rate cuts in the UK. Perkins said, “We now hold our breath to see if other major lenders will follow suit.”
David Stirling, director at Mint Mortgages & Protection, said it remained to be seen if Barclays’ rate cuts were a temporary gesture, but he added that many expected other major lenders to follow suit in the coming days.
Pete Mugleston, managing director of Online Mortgage Advisor, echoed the sentiment, suggesting that Barclays’ move could prompt other lenders to lower their rates. However, he noted that the unpredictable nature of the markets may lead to some lenders holding off on similar rate reductions until there is more stability in the global financial landscape.
In addition, expectations for a rate cut by the Bank of England have fluctuated following the latest developments in the US tariff situation. As of Thursday morning, money markets were indicating a 78% probability of a rate cut at the Bank of England’s meeting on 8 May, with a reduction from 4.5% to 4.25%. There was also a 22% chance that the Bank would decide to keep rates unchanged.
Earlier in the week, the expectation for a rate cut seemed almost certain, with some speculating that the Bank might even reduce rates by half a percentage point to 4% to support the UK economy amid the global trade uncertainty.
Barclays’ mortgage rate cut has already had an impact on the market, but it remains to be seen whether it is the beginning of a broader trend.
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