British Lenders Cut Mortgage Rates as Competition Rises
British lenders are slashing mortgage rates as competition in the market increases, inflation slows, and expectations of future interest rate cuts by the Bank of England (BoE) grow. According to data from Moneyfacts, average rates on fixed-rate mortgage products have dropped by over 0.5 percentage points since reaching their peak in July.
The latest inflation figures, released on Wednesday, revealed that price rises in the UK fell faster than expected in October, dropping to 4.6% from 6.7% the previous month. This has further fueled speculation of BoE rate cuts in the coming year.
On Wednesday, HSBC became the latest lender to cut rates, reducing them by an average of 0.15 percentage points across its products. This follows similar moves by Halifax, Virgin Money, and Nationwide in recent days.
Mortgage brokers have observed several lenders reducing rates in recent weeks to keep up with the shift in market pricing on future rates. A spokesperson for broker John Charcol told Reuters that lenders are catching up with the overall trend.
As of Wednesday, the average two-year fixed-rate mortgage stood at 6.19%, down from its peak of 6.86% on July 26. Similarly, the average five-year rate decreased to 5.79% from its peak of 6.37% on August 2, as reported by Moneyfacts.
Some bank mortgage teams are also increasing their activity towards the end of the year to meet company targets. A consultant who advises lenders, speaking on condition of anonymity, stated that many teams are likely to be behind on their targets due to the wider market slump.
While the rate reductions will provide some relief to borrowers seeking new mortgage deals, the outlook for Britain’s housing market remains challenging. The country’s inflation rate remains high compared to most other developed economies.
Separate data released on Wednesday showed that UK house prices fell in annual terms in September for the first time since 2012, highlighting the weakness of the property market.
However, it is unlikely that variable rates, which closely track the BoE rate, will match the cuts made to fixed mortgage rates by lenders.
More detail via Investing.com UK here… ( Image via Investing.com UK )