Three major lenders, Barclays, HSBC and TSB, have announced mortgage interest rate cuts on more than 100 deals, providing welcome relief to borrowers who have faced rising interest rates in recent weeks.
Barclays will implement major cuts on Friday, cutting fixed interest rates on buy-and-remortgage deals by up to 0.45 percentage points. It is worth noting that the interest rate on one of its five-year fixed deals will fall from 4.77% to 4.32% for borrowers who remortgage with a 40% deposit.
HSBC has announced plans to cut interest rates on more than 100 of its fixed deals spanning two, five and ten years, targeting homeowners and landlords alike.
With TSB also announcing cuts to some of its two- and five-year deals, cutting interest rates by up to 0.1 percentage point.
Brokers expect that these interest rate cuts will prompt other lenders to follow suit. Hina Budhia, of Knight Frank Finance, commented: “HSBC already had several cheap deals on the high street, so this is a statement of intent. We will have to wait and see, but I would be surprised if we don’t see more lenders cutting back.” Interest rates in response.
These cuts come after a period of increased mortgage interest rates, driven by delayed expectations of a rate cut by the Bank of England due to persistent inflation and rising swap rates, which banks use to price fixed loans.
Last week, the Bank of England kept borrowing costs at a 16-year high of 5.25%, but indicated that the interest rate could be cut as soon as next month if inflation continues to fall. This, coupled with the recent decline in swap rates – with two-year swaps falling from 4.57% to 4.46% and five-year swaps from 4.02% to 3.9% – has supported lenders.
Mark Harris, of property broker SPF Private Clients, said: “This wave of interest rate cuts by some major lenders is great news for borrowers. Lenders tend to follow the herd when it comes to mortgage pricing, so these cuts should give Others trust to lower their interest rates, which boosts market activity and confidence.
Currently, the average two-year fixed rate is 5.92%, and the average five-year deal rate is 5.49%, according to a Moneyfacts analyst. These averages include deals for borrowers with negative credit ratings and small deposits, which typically have higher interest rates.
Nearly 800,000 households are expected to move from a fixed-rate deal to a higher rate between now and November, according to analysis by the Liberal Democrats and the House of Commons Library. Nicolas Mendes, of broker John Charcol, highlighted the “huge potential” for further interest rate cuts in the next two weeks.
He added: “Financial markets have adjusted their expectations, signaling a potential end to the recent trend of lenders increasing interest rates. For those who have recently applied for a mortgage, they may have the opportunity to switch to a lower rate due to the change in market conditions, which It could result in significant savings over the life of your mortgage.
This series of interest rate cuts by major lenders provides a much-needed respite to homeowners and is expected to stimulate market activity and confidence in the coming weeks.