High street lenders, including Halifax, NatWest, and Santander, have reduced their mortgage rates in anticipation of a potential Bank Rate cut.
The Bank of England has maintained interest rates at 5.25% for the past year, following 14 consecutive increases since December 2021, but is expected to announce a cut at midday on Thursday.
Halifax has announced reductions in its fixed mortgage rates, effective Thursday, for both homeowners looking to remortgage and those purchasing a property.
NatWest has also lowered rates across its fixed mortgage range by up to 0.15 percentage points, affecting both remortgage and purchase loans.
Similarly, Santander has reduced rates by up to 0.20 percentage points on its purchase, remortgage, and new build mortgages this week. It has also decreased rates on some of its buy-to-let loans.
These moves come after weeks of rate reductions by high street lenders aiming to attract business during a sluggish housing market. Last week, Nationwide became the first high-street lender since April to offer a deal below 4%.
The building society is now offering a five-year fixed rate of 3.99% to home buyers with a 40% deposit, although this rate is not available for remortgaging.
This decision followed similar rate cuts from other banks, including HSBC and Barclays.
Swap rates, which are the main pricing mechanism for fixed-rate mortgages, have been gradually falling over the past month, allowing lenders to pass on savings to borrowers.
According to Moneyfacts, the average two-year fixed residential mortgage rate is currently 5.77%, while the average five-year rate is 5.38%.
At the same time, the two-year swap rate is currently 4.25%, and the five-year swap rate is 3.77%, giving lenders more room to reduce rates further.
When the Bank Rate is high, it affects mortgage and savings rates. The average two-year fixed mortgage rate was 2.34% in December 2021.
Rachel Springall, an analyst at Moneyfacts, noted: “The average rates on two- and five-year fixed-rate mortgages have both decreased month-on-month for the first time in six months. Waiting six months for rates to fall will no doubt require a lot of patience from borrowers who are counting down the days towards the end of their low-rate fixed deal.”
Nicholas Mendes of broker John Charcol suggested that if the Bank cuts its rate on Thursday, it could initiate a “downward Bank Rate cycle,” revitalizing market activity and leading to further declines in mortgage rates over the coming months.
Around 1.6 million homeowners with fixed-rate deals expiring this year are hoping for a rate cut on Thursday, according to trade body UK Finance.
However, Lloyds Bank CEO Charlie Nunn warned that rate cuts might not directly translate into more competitive mortgage deals. In the Bank’s half-year results, which showed a 14% overall profit decline, he noted that future Bank of England rate cuts were already factored into many current mortgage offers.
