Several major lenders, including Nationwide, HSBC, and TSB, have reduced rates on their fixed mortgage deals, signalling that home loan costs may be close to peaking after rising to nearly 7%. The cuts come after inflation fell further than expected in June, calming financial markets and lowering expectations for future interest rate rises.
The Bank of England is expected to raise rates for the 14th consecutive time next week, by a quarter point to 5.25%. Investors now anticipate rates will peak at 5.75% next March, down from previous forecasts of 6.5%, which would have pushed mortgage costs even higher for many homeowners.
Rising housing costs are adding pressure to households already struggling with higher food and energy bills. A July poll by the Office for National Statistics found that 45% of people paying rent or a mortgage had seen a cost increase in the past six months, and 40% reported difficulty making these payments, compared to 31% a year ago.
The average two-year fixed-rate mortgage hit 6.86% on Wednesday, according to Moneyfacts, before edging down to 6.83% on Thursday and 6.81% on Friday. Analysts expect average rates to continue to fall, and other lenders including Barclays have also cut rates in recent days.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said fixed mortgage rates and savings rates may have peaked. However, she noted that homeowners on variable rate deals could still see increases if the base rate goes up as expected. Coles added that while a return to the ultra-low rates of recent years is unlikely, the reductions offer some overdue good news for borrowers and could make a material difference for those remortgaging or entering the market.
