HSBC has become the first major UK lender to cut mortgage rates this year, a move that could spark a price war among rivals. The banking group reduced rates across a range of residential and buy-to-let products, effective Monday.
The cuts follow the Bank of England's base rate reduction in December to 3.75%. Mortgage brokers expect other lenders to follow suit. David Stirling, an independent financial adviser at Mint Wealth, said: 'Many of the other big lenders will feel the need to also cut to remain competitive, which could result in a rate war.'
Approximately 1.8 million homeowners are expected to refinance this year, many coming off super-low fixed-rate deals secured before rates began rising in 2021. The average two-year fixed residential mortgage rate was 4.83% last week, according to Moneyfacts.
City economists anticipate two more base rate cuts this year, despite the Bank of England warning such judgments are 'a closer call'. The December cut was approved by a five-to-four vote, with Governor Andrew Bailey switching to support a cut.
Nicholas Mendes of John Charcol noted that fixed mortgage rates already reflect expected cuts, with the cheapest two- and five-year fixes below bank rate. He added that rates may fall less than bank rate from here and could rise above it by year-end.
