Lenders Cut Mortgage Rates at Start of Price War as Struggling Homeowners Get Needed Boost
- Brokers said a “full-blown price war” was now “well and truly underway”
Struggling homeowners received a boost yesterday after a five-year fixed-rate mortgage deal below 5 per cent went on sale for the first time since June.
Brokers said a “full-blown price war” was now “well and truly underway” as the pace of interest rate cuts had intensified.
Britain’s biggest lenders have made a series of rate cuts in recent days, giving borrowers a much-needed respite after rates soared over the summer.
Yesterday, The Mortgage Works, owned by Nationwide Building Society, announced a five-year fixed rate deal priced at 4.99 per cent.
The home loan is only for buy-to-let borrowers, charges a 3 per cent fee and is available to those with a loan-to-value ratio of 55 per cent or less.
Britain’s biggest lenders have made a series of rate cuts in recent days, giving borrowers a much-needed respite after rates soared over the summer (File Image)
According to experts, this is the first fixed-rate mortgage loan to fall below 5 percent since the end of June.
The best five-year fixed-rate residential mortgage for buyers was with Santander at 5.1 per cent on Thursday, while the best five-year remortgage was at 5.22 per cent with Cumberland Building Society, according to brokerage L&C.
Broker Ranald Mitchell, of Charwin Private Clients, said the new 4.99 per cent rate would put pressure on other lenders to follow suit.
“Seeing guys starting with a four is a sight to behold and could provide a boost to the market and borrower confidence,” he said.
Gary Bush, financial advisor at MortgageShop.com, said lenders had “gone from store closing mode to full-blown price war mode,” adding: “The mortgage rate war is really underway and looks likely.” “It will be a very busy end to 2023.”
Halifax, the UK’s largest lender, has today cut rates for new customers by up to 0.5 percentage points. It now offers five-year fixed deals at 5.15 per cent. Coventry Building Society has also reduced its rates today.
The home loan is only for buy-to-let borrowers, charges a 3 per cent fee and is available to those with a loan-to-value ratio of 55 per cent or less (File Image)
Barclays announced rate cuts yesterday, with plans to reduce costs by up to 0.1 percentage point.
Earlier this week, Nationwide announced it would reduce borrowing costs by up to 0.29 percentage points, while Santander cut its deals by up to 0.14 percentage points.
Challenger banks Skipton Building Society and MPowered Mortgages are among those to have already made the most reductions.
The cuts will further bolster hopes that mortgage costs have peaked.
Bank of England Governor Andrew Bailey told MPs last week that the end of rate rises was now “much closer” but also warned that borrowing costs could still rise due to high inflation.
Interest rates have been raised 14 times since December 2021 to 5.25 per cent, adding to the suffering of borrowers as the Bank of England struggles to control inflation. They are expected to rise again – to 5.5 percent – next week.
Bank of England Governor Andrew Bailey told MPs last week that the end of rate rises was “much closer” but also warned that borrowing costs could still rise due to high inflation.
The Bank has been urged to stop raising interest rates amid fears of a recession after official figures released on Tuesday showed GDP contracted 0.5 per cent in July.
The average two-year mortgage deal still stood at 6.65 per cent on Thursday, with typical five-year rates at 6.14 per cent, according to rates expert MoneyfactsCompare.
Homeowners have been forced to watch borrowing costs skyrocket in recent months. But lenders have been cutting their rates since mid-July after data showed inflation had slowed beyond expectations.
Jamie Lennox, of broker Dimora Mortgages, said a sharp drop in home sales was forcing lenders to adjust prices in a bid to gain as much market share as possible.
‘It is not surprising that perspectives are changing. The concern is that these reductions are too small and too late to save the housing market,” he said.
House prices fell in August at the fastest rate in 15 years, according to lender Halifax. Higher interest rates have hit buyer demand, forcing many people to delay purchasing a property in the hope that rates will drop again in the coming months.
