2-year mortgage rates to drop to 0.75 percent amid raging price war

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Experts predict two-year mortgage rates could drop to 0.75 percent as major banks enter a price war in a desperate attempt to attract more clients.

Lenders are likely to increase pressure on competitors after Rishi Sunak removed the stamp duty exemption, which sent demand down after months of explosive growth.

Many players have already cut rates in response, deploying the cheapest mortgage ever offered deals, including many offers at prices below 1%. Experts believe that as competition for preferential rates intensifies, there will be even more ahead.

Aaron Strutt, director of products at brokerage Trinity Financial, said: “More lenders will cut their prices in the coming weeks. Mostly big boys – Santander, Halifax, Barclays.

“It could drop to 0.75%. [for two-year fixes]it wouldn’t be a surprise. If rates continue to decline, then five-year plans are not far off. ”

Last week, Nationwide launched the cheapest five-year fixed rate mortgage ever registered in the UK at a rate of 0.99 percent. The deal is available to borrowers re-mortgaging or moving home with a deposit of at least 40 percent and a commission of £ 1,499.

The builder also currently offers the lowest fixed deals for two and three years, which Moneyfacts, the data-processing company, “has intensified the war on mortgage rates.”

It is the latest lender to slash its prices since the lockdown, a trend that began in April when the Hinckley & Rugby Building Society made the first sub-1PC deal since the start of the pandemic.

The ever lower rates indicate that banks and building societies are confident in the UK’s post-crisis recovery and are eager to take advantage of high property prices.

The deals are so attractive that borrowers were even willing to shoulder prepayment penalties to ensure they could lock in record rates.

Chris Sykes of Private Finance, another broker, has seen a significant increase in the number of inquiries from existing clients looking to re-mortgages, despite the fact that early repayment fees are often charged.

He said: “While the fees can be significant, the rates offered below 1% represent significant savings over the life of the mortgage product, and there could be some decent savings compared to rates in effect a few years ago.

“We suspect that we will see an increase in requests for re-mortgages in the coming weeks as more and more people take advantage of this incredibly favorable situation for borrowers.”

But not everyone will benefit from the savings in this situation, he warned, as early repayment costs can be significant.

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