HSBC Holdings PLC (LSE: HSBA) has reduced its mortgage rates to the lowest levels among major banks, sparking speculation that average interest rates could drop to around 3.5% by the end of the year.
Premier account holders can now secure five-year fixed-rate mortgages at 3.81% following HSBC’s latest rate cut. This move follows a series of reductions by other banks.
For those without a Premier account, the rate for the same term is 4.83%, which remains below the current market average.
According to Moneyfacts, the average rate for a five-year fixed mortgage in the UK stands at 5.25%, while typical two-year deals are priced at 5.62%.
HSBC’s recent rate cuts follow similar moves by Lloyds Banking Group PLC (LSE: LLOY)’s Halifax, TSB Banking Group (LSE: TSB), and Virgin Money UK PLC (LSE: VMUK) this week. NatWest Group PLC (LSE: NWG)’s 3.83% five-year fixed-rate mortgage is the closest comparable offer.
Despite these lower rates, many standard deals come with upfront fees, such as NatWest’s £1,495 charge for its five-year fixed rate.
Adrian Anderson, director at brokerage Anderson Harris, suggested that if the trend of rapid rate cuts continues, average rates for five-year fixed mortgages could approach around 3.5% by the end of the year. He also noted that two-year fixed rates might dip below 4% in the meantime.
This development follows the Bank of England’s recent base rate cut, with expectations for further reductions in the coming months, leading to increased competition among lenders to attract buyers as the property market outlook improves.
