Barclays to cut mortgage rates

Competition in the mortgage market has been stepped up as Barclays announced it is cutting a raft of rates in its fixed deal range.

The bank, which is working to rebuild its customer reputation following its Libor-fixing scandal, said it will lower six of its deals on offer by up to 0.3% from Wednesday. The new fixed deals include a market-leading two-year mortgage at 3.29% with no application fee, although customers will need a sizeable 30% deposit to take it up.

The lender is dropping its five-year fixed-rate at 70% loan-to-value by 0.3%, to a rate of 3.99%, the lowest five-year deal Barclays has offered this year.

It is also dropping the rate on its two-year fixed deal for people with a 40% deposit by 0.2% to 3.09%. These deals come with a £999 application fee or £499 for those who qualify for a Barclays loyalty mortgage.

Lenders generally have been raising their rates and tightening their borrowing criteria amid the weak economy, and those with a low deposit are expected to have a particularly tough time finding a deal in the coming months.

However, there have been signs of increased competition in recent weeks among lenders to attract less "risky" customers with larger deposits.

Earlier this month, HSBC launched a five-year fixed rate mortgage with a record low rate of 2.99%, although customers will need a 40% deposit to take it up and a £1,499 booking fee. Santander also launched a five-year fix at 2.99% last week with a £1,495 fee for its customers with a 40% deposit.

Rachel Springall, spokeswoman for comparison website Moneyfacts, said: "The new two-year fixed deal from Barclays at 3.29% is the lowest rate on the market at 70% loan-to-value. There is no fee to pay which will be good news to borrowers looking to keep up front costs down."

Fixed mortgage costs are influenced by money market swap rates, which have been falling.

Andy Gray, head of mortgages at Barclays, said: "We have recently seen an improvement in the swap rates and so we've taken the opportunity to pass these benefits onto customers by reducing some of our more popular fixed rates to give them some great deals - including a five-year rate below 4%, the lowest we've offered this year.