UK lenders are expected to launch another round of mortgage rate cuts next week amid optimism home-loan costs have peaked after the Bank of England’s decision to keep interest rates on hold.
So far Nationwide is the only big lender to reduce mortgage rates since the Bank announcement on Thursday. NatWest went earlier in the week after official data showed an unexpected fall in UK inflation in August.
Mortgage costs had been ratcheting up for months, but since the second half of July, banks and building societies have been reducing their rates on new deals. Many brokers say a full-scale mortgage price war is under way as lenders jostle to attract customers.
As UK mortgage interest rates fall, should you choose a two-year or five-year fix?Read more
Nick Mendes of the broker firm John Charcol said Nationwide, which on Friday reduced some fixed-rate products by up to 0.31 percentage points, had been the “big one” but he also expected to see movement from HSBC and Coventry building society.
“These three are the main lenders pushing to be market leaders and continually repricing the products downwards,” he said.
Another positive sign was the two-year swap rate – a key measure lenders use to determine the cost of mortgage borrowing – dropped below 5% on Friday morning. “A nice end to the week, and potentially a positive Monday expected with further rate changes,” Mendes added.
In recent days, fixed-rate mortgages priced at below 5% have gone on sale for the first time since June, with NatWest, Yorkshire building society and Virgin Money among those launching five-year deals at or close to 4.99%.
On Friday, the average two-year fixed residential mortgage rate was 6.56%, albeit down from the previous day’s 6.58%, while the average five-year fix was 6.06%, down from 6.07%, according to the data firm Moneyfacts.
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While the Bank of England’s interest rate pause may be good news for homeowners, the consumer champion Martin Lewis issued an “urgent savers warning” that some of the attractive deals available could be about to disappear.
The MoneySavingExpert.com founder warned followers on X, formerly Twitter, that financial firms offering fixed-rate savings accounts may “shave down their rates at speed”. Those looking to open an account should “open a top fix this minute”, he added.
