British lenders are slashing mortgage rates amid increased competition, slowing inflation, and growing speculation about future interest rate cuts by the Bank of England (BoE). According to data from Moneyfacts, average rates on fixed-rate mortgage products have dropped by over 0.5% since reaching their peak in July. This trend is occurring even before the BoE starts to decrease the benchmark rate that determines borrowing costs.
The recent inflation data for October revealed that price increases in the UK fell more rapidly than expected, dropping to 4.6% from the previous month’s 6.7%. As a result, investors are placing more bets on the BoE cutting interest rates in the coming months. HSBC, the latest lender to follow suit, reduced rates by an average of 0.15% across its mortgage products on Wednesday. Halifax, Virgin Money, and Nationwide have also made similar moves in recent days.
Mortgage brokers have observed a string of rate reductions by lenders in recent weeks, as they attempt to align themselves with the overall market shift regarding future interest rates. John Charcol, a broker, stated that these rate cuts will likely provide relief to borrowers seeking new mortgage deals.
The latest figures from Moneyfacts indicate that the average two-year fixed-rate mortgage now stands at 6.19%, down from its peak of 6.86% on July 26. Similarly, the average five-year rate has fallen from 6.37% on August 2 to 5.79%. Additionally, some bank mortgage teams are ramping up their activities towards the end of the year to meet their year-end targets. According to an anonymous consultant who advises lenders, many of these teams are likely to be behind due to the wider market slump.
However, while the reduction in rates will provide some much-needed relief for borrowers, the outlook for the UK housing market remains challenging. UK house prices fell in September on an annual basis for the first time since 2012, highlighting the weak state of the property market. Moreover, the country’s inflation rate remains high in comparison to most other developed economies.
It is worth noting that the cuts to fixed mortgage rates are unlikely to be accompanied by reductions in variable rates that closely track the BoE rate.
Overall, these developments indicate that lenders are responding to the changing economic landscape by cutting mortgage rates, which is likely to benefit borrowers. However, challenges still persist in the housing market, and the impact of these rate cuts may not be evenly distributed across all types of mortgages.
More detail via Yahoo Sports here… ( Image via Yahoo Sports )