On Tuesday morning, both Barclays and TSB made headlines by announcing reductions in their mortgage rates, raising expectations that further cuts could follow in the coming weeks.
Barclays has lowered rates on several fixed-rate mortgage deals, including a five-year option for buyers with a 40% deposit, now priced at 4.11%.
Meanwhile, TSB has followed suit, slashing rates by up to 0.25 percentage points on its five-year fixed mortgages.
Barclays and TSB aren’t the only lenders making moves to benefit mortgage borrowers. Smaller lenders, including Skipton Building Society and Fleet Mortgages, have also reduced their rates this week.
This marks the second round of cuts from Barclays in just two weeks, following a period of rising costs in the market after the Labour government’s budget announcement, which included large-scale borrowing measures.
‘Hopefully more lenders will follow suit and cut rates’
Industry experts are now speculating that additional rate cuts could be on the horizon before the end of the year.
However, while these recent moves are encouraging, experts caution that they don’t signal the start of a full-scale “price war” among mortgage lenders.
Mortgage rates remain higher than in the autumn, when deals below 4% were available to some borrowers.
Lyle Campbell from Brokers Mortgage Hub shared his thoughts on the situation, “Hopefully this drags more competition and more lenders will follow suit and cut rates. That can only be a good thing for borrowers, which in turn is a good thing for us brokers.”
Campbell also pointed out that Halifax’s actions often set the tone for the rest of the market. “Whatever Halifax tend to do, the rest will follow, just because Halifax is the biggest lender by some way. If they make moves, the rest almost have to keep up.”
Swap rates and year-end targets likely driving reductions
The recent increases in mortgage rates were largely due to the impact of the Autumn Budget on swap rates.
Swap rates, which reflect market expectations of future Bank of England base rate movements, rose sharply following the Budget.
Economists had predicted a slower pace of interest rate cuts, with inflation potentially peaking higher than anticipated.
However, with swap rates now easing, several lenders have started to reduce their rates.
Major players like NatWest, HSBC, and Barclays have already made cuts in recent weeks, setting the stage for more potential reductions.
Gindy Mathoon, Broker of the Year from Create Finance, explained the situation, “As soon as swap rates come down, that obviously makes funding a lot safer for lenders. Lenders are keen to pass on the cheaper funding to borrowers. Possibly, lenders have targets to hit, and with this year being quite volatile, they may not have hit the targets they wanted to achieve.”