Major High Street Lenders Cut Mortgage Rates This Week
In a significant boost for homebuyers, several major high street banks have announced reductions in mortgage rates this week, marking a shift after weeks of rising costs linked to geopolitical tensions. This move comes as lenders respond to falling swap rates and improved market conditions.
HSBC and TSB Lead Rate Reductions
HSBC is set to introduce cuts across its residential and buy-to-let mortgage range on Friday, with the new rates becoming public upon launch. TSB will also decrease rates on Friday, specifically reducing its two-year fixed house purchase mortgages by up to 0.45 percentage points. However, TSB is increasing some other mortgage rates, including those for product transfer deals and additional borrowing.
Santander Initiates the Trend
Santander became the first major lender to cut rates since the start of the Middle East conflict, reducing some mortgage products by up to 0.28 percentage points on Thursday. The bank attributed this to a reduction in borrowing costs following a decline in swap rates, which lenders use to price loans.
Current Mortgage Rate Trends
According to the latest data from comparison website Moneyfacts, the average two-year fixed mortgage rate stood at 5.88% on Thursday morning, down slightly from 5.89% on Wednesday. The average five-year fix remained unchanged at 5.77%. This contrasts with early March, when average rates were significantly lower at 4.83% for two-year fixes and 4.95% for five-year deals.
Mortgage rates had risen due to fears that the Iran war could reignite inflation, leading markets to expect the Bank of England to maintain high interest rates for longer. However, Moneyfacts now suggests that rates have plateaued, with 6,665 homeowner mortgage products available on Thursday, up from a low of 5,856 on 24 March.
Expert Insights on Market Stability
Adam French, head of consumer finance at Moneyfacts, noted that average mortgage rates have held steady since Easter, stating: “Rising mortgage rates seem to have plateaued for now. Product numbers have also been steadily improving; 809 deals have returned to the market since it hit a low. However, this is still 973 fewer than before the conflict in Iran began.”
He explained that money markets are now pricing for fewer base rate hikes, with swap rates falling back towards 4% from highs around 4.4%. This has enabled lenders like Santander, Atom Bank, and Skipton Building Society to implement meaningful cuts in recent days.
Ongoing Risks and Future Outlook
Despite the positive developments, French warned that mortgage pricing is driven more by expectations than current rates, leaving borrowers vulnerable to sudden shifts. Ongoing uncertainty in the Middle East and the potential threat of ‘Trumpflation’ mean the path to cheaper borrowing remains fragile. Consumers are advised to stay informed and consider their options carefully in this volatile market.
