HSBC Joins UK Banks in Cutting Mortgage Rates
HSBC has announced reductions in its mortgage rates, joining Barclays and NatWest in a move that comes on the heels of hints from the Bank of England about a potential summer base rate cut.
Barclays lowered its fixed-rate home loan costs for new deals on Tuesday, with HSBC’s cuts set to take effect on Wednesday. Mortgage brokers anticipate that more lenders will follow suit.
Despite these reductions, the overall impact remains modest. Borrowers continue to face relatively high costs, with many expected to see significant increases in their monthly repayments once their current, cheaper deals expire.
Mortgage rates have been rising, partly due to reduced competition among lenders during the election campaign. According to Moneyfacts, the average rate for a two-year fixed mortgage stands at 5.96%, while the average five-year deal is at 5.53%.
“These moves suggest that the recent edging up in rates is now unwinding and most cuts are being made in small steps,” said David Hollingworth from broker L&C.
Fixed mortgage rates remain unchanged until the deal expires, usually after two or five years, requiring borrowers to select a new rate. If they do nothing, they revert to a variable rate, which can be very costly.
This year, about 1.6 million existing borrowers will see their relatively cheap fixed-rate deals expire.
While spring typically brings more activity in the housing market, uncertainty over political outcomes may have dampened this trend.
Borrowers are also closely watching the Bank of England’s Monetary Policy Committee (MPC), which will decide on interest rates at its next meeting on 1 August. Recent signals from the MPC suggest a majority might support a rate cut.
Optimism about this potential outcome may have spurred the latest rate reductions by major lenders, who are also keen to attract more customers.
“Lenders will be keen to kickstart a market lethargic from the election, hot weather, and football,” said Andrew Montlake from mortgage broker Coreco. “The country desperately needs the boost of a cut to relieve some of the financial pressures that have held back the economy and put borrowers under immense pressure.”
However, Montlake cautioned that the recent positive news about falling inflation might be temporary, possibly prompting more cautious actions from the Bank.
Michelle Lawson from Lawson Financial noted that while borrowers are “beleaguered,” more lenders might cut rates in the coming days.
Additionally, figures from UK Finance, representing lenders, show a further decrease in the number of people paying only the interest on their home loans, despite the challenging conditions for borrowers.
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HSBC Joins UK Banks in Cutting Mortgage Rates