Lloyds and Barclays offer new mortgage deals
LLOYDS and Barclays have each released new mortgage deals in the run up to Christmas, with Lloyds being another bank to fill the gap being left by the Help to Buy Mortgage Guarantee when it ends on December 31st 2016
Following in the recent wake of NatWest and Royal Bank of Scotland, Lloyds will soon be offering a 95% mortgage to house buyers, although it's still not clear whether it will be only for homes under £600,000.
And while Barclays won't be offering a 95% mortgage of their own, they're nonetheless announcing "significant mortgage rate cuts along with the launch of some highly competitive new products designed to save customers money on their monthly mortgage payments".
Together, these two announcements will help to boost the Brexit-proof housing market even further, at a time when the Bank of England has just warned that UK households may be taking on too much debt.
Describing Lloyds' new 95% mortgage, their Mortgage Products Director Chris Gowland said, "As a leading supporter of the Help to Buy: mortgage guarantee scheme ... continuing to lend to this area of the market is a key part of our commitment to helping first-time buyers".
Neither he nor the bank have yet released any specific details on the terms of the new mortgage, although Lloyds say that these "will be announced in December".
Still, if they want to compete with NatWest and the Royal Bank of Scotland, they should be looking to place the mortgage's interest rates within the 3.69% to 4.59% range.
Such a range would have the result that a customer borrowing 95% on, say, a property worth £300,000, will have to pay between £1,456 and £1,599 a month if they're looking to repay their mortgage within 25 years.
These are fairly high instalments, and they serve to underline the Bank of England's warning this week that the UK debt-to-income ratio may continue increasing beyond 133%.
On the other hand, if you can put together a bigger deposit, then it might be worth looking at Barclays' recently announced range of reductions and new mortgages.
For example, they're reducing the interest on their two-year fixed 75% mortgage by 0.50%, so that their customers will now pay 1.89% on a maximum loan of £250,000.
Their five-year fixed 60% and 80% mortgages are also having their interest rates reduced, by 0.10% and 0.41% respectively.
This puts the rate of their 60% five-year mortgage at 1.89%, in comparison to the 1.83% offered by Virgin Money or the 1.99% provided by HSBC (without fees), for example.
In other words, it's fairly competitive but not amazingly so. Nonetheless, the Director of Barclays Mortgages, Craig Calder, has promoted the new rates by saying, "Christmas is almost upon us and we want to help households and landlords save money during this typically expensive time of the year".
Of course, a mortgage rate isn't just for Christmas, so the tie-in with the festive season is mainly a nice coincidence that Barclays have happened to use as a marketing gimmick.
Base and swap rates
And given that the Bank of England cut interest rates to a historic low of 0.25% in August, it was about time they passed on this drop to their mortgage customers, especially since they, like many banks, were quick to lower the interest they offered on various savings accounts.
However, as we wrote regarding NatWest's new 95% mortgage, it's likely that a recent rise in the "swap rate" - which essentially determines the rates banks pay to borrow from each other - could mean that mortgage interest rates soon climb as well.
If that's the case, then Barclays might not keep their lower rates for all that long, which would mean they kind of were just for Christmas, after all.