Business
Boost to homeowners as four major lenders lower mortgage rates
Homeowners looking to renew their mortgage before the end of the year have received a boost, with four major lenders reducing the interest rates on some deals.
Despite the Bank of England maintaining the base rate at 4 per cent, and not being expected to alter it before December at the earliest, there remains movement in the wider market around both savings and mortgages.
Last week, Zopa bank brought out an inflation-beating 4.75 per cent easy-access savings account, and now some households have another positive to consider, with lowered rates on mortgage deals.
Barclays announced five five-year products with newly lowered rates, ranging from 60 per cent to 95 per cent loan-to-value, with the lowest interest rate among these products coming in at 3.91 per cent.
HSBC did not announce exact cuts, but reduced a raft of residential mortgage products, with Santander then following suit, lowering fixed rates by as much as 0.36 per cent in some three-year fixes. On Monday, NatWest also cut rates, including lowering a two-year fixed deal to 3.77 per cent.
More than 400,000 homeowners will be coming to the end of a fixed-term deal before 31 December, mortgage and finance expert Jo Hodgson told The Independent, with the vast majority likely to need to renew their agreement.
Those who took out two-year deals initially will find interest rates are lower this time round – but those coming to the end of post-Covid purchases on five-year fixes will be preparing for a rise in payments.
This month’s lower-than-expected inflation reading has potentially paved the way for the Bank of England to lower interest rates further in the coming months, but few expect there to be more than one cut in the next three months, meaning that swap rates – which mortgage deals are based on – have already priced in most potential movements.
“There are early positive signs for mortgage rates after the rate of inflation for September held steady, undershooting expectation,” David Hollingworth from L&C Mortgages said.
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“Hopes that inflation may have peaked at a lower level than expected have opened the door to a reduction in the Bank of England base rate before the end of the year. As market forecasting has improved, swap rates have fallen further, which should give lenders the chance to improve their fixed rates.
“We know that once there are moves from some of the big players, it will inevitably lead to others following suit. If the more positive outlook in the markets holds firm, we could see another series of repricing moves that will cut fixed-rate pricing.
“However, with the Budget to come, it’s hard to predict where sentiment could head from here. That’s already brought some borrower anxiety into play, and so there’s still a strong case for taking a rate now and keeping a close eye on market movement from here. That will give security, but still allow a jump to a lower rate before completion if we see further improvements.”