UK Lenders Slash Mortgage Rates Amidst Growing Competition and Predictions of BoE Rate Cuts
British lenders are reducing mortgage rates at an accelerated pace as competition intensifies, inflation slows, and markets predict future interest rate cuts by the Bank of England (BoE). Data from Moneyfacts reveals that average rates on fixed-rate mortgage products have dropped by more than 0.5 percentage points since their peak in July, even before the BoE initiates any rate reductions.
The latest inflation data, released on Wednesday, shows that price rises in the UK fell faster than expected in October, plummeting to 4.6% from 6.7% the previous month. This news has further fueled investor speculation on upcoming BoE rate cuts in the coming year.
HSBC is the most recent lender to join the trend, cutting rates on Wednesday by an average of 0.15 percentage points across its mortgage products. Other major lenders such as Halifax, Virgin Money, and Nationwide have also recently reduced their rates.
Mortgage brokers have witnessed a series of rate reductions over the past few weeks in response to the overall market shift in pricing of future rates. John Charcol, a prominent broker, confirmed this, stating that lenders are trying to catch up with market expectations.
According to Moneyfacts, the average two-year fixed rate mortgage currently stands at 6.19%, down from its peak of 6.86% on July 26th. The average five-year rate has also decreased, falling from a peak of 6.37% on August 2nd to 5.79%.
Some bank mortgage teams are ramping up their efforts at the end of the year to meet company targets, as the wider market has experienced a downturn. However, the overall outlook for the UK housing market remains challenging, with the country’s inflation rate remaining high compared to other developed economies.
Separate data released on Wednesday indicates that UK house prices declined on an annual basis in September for the first time since 2012, highlighting the weak state of the property market.
Although the rate reductions by lenders will provide some relief to borrowers seeking new mortgage deals, variable rates that closely track the BoE rate are unlikely to see similar cuts.
The mortgage rate cuts come in the wake of increased competition among lenders and a general trend of lower interest rates. The housing market, however, continues to face numerous challenges, including high inflation and a weakened property market. As the year comes to a close, some lenders are working to meet their year-end targets, hoping to offset the overall slump in the market. Despite these rate reductions, variable rates closely tied to the BoE rate are not expected to see the same cuts.
More detail via Reuters here… ( Image via Reuters )