Halifax, the UK's largest mortgage lender, is poised to make significant cuts to rates on some of its fixed mortgage offerings, potentially providing relief to certain homeowners.
Starting this Friday, the bank will reduce rates by up to 0.71 percentage points, with a five-year fixed deal's rate dropping from 6.10% to 5.39%.
Other financial institutions, including HSBC, Nationwide, and TSB, have also reduced some of their rates.
As the Bank of England has hiked interest rates to combat soaring prices, mortgage rates have been climbing.
Halifax's rate cuts will span various product offerings, with slighter decreases seen in two-year fixed deals and some tailored to first-time buyers.
In the current week, other major mortgage lenders have also cut rates, leading some experts to speculate that the ease in high inflation – which gauges the pace of price increases – could be underway.
Despite a moderation in inflation, it remains at 7.9%, nearly four times above the Bank of England's 2% target.
Last week, the Bank of England raised interest rates for the 14th consecutive time, moving from 5% to 5.25%.
Elevated interest rates translate to higher mortgage payments, thus reducing disposable income for other expenditures.
Why are interest rates going up? What happens if I can't afford to pay my mortgage? Among the reductions, HSBC has cut certain rates for homebuyers, first-time buyers, and remortgagers by up to 0.35 percentage points, along with introducing a £500 cashback incentive for some deals.
Nationwide is likewise trimming rates for remortgagers by up to 0.35% across two-, three-, and five-year fixed deals.
Aaron Strutt, a mortgage broker at Trinity Financial, stated, "More of the larger banks and building societies are lowering their rates, which is good news, especially given the scale of rate increases we have seen in recent months."
"It would not be a surprise if more of them improve their rates over the coming weeks," he added.
"Lenders are starting to realize the market is slowing down, and they need to improve pricing to attract more borrowers."
'Concern for Families' While the decline in mortgage rates will be positively received by homeowners, their repayments still exceed those of previous years.
A return to the ultra-low mortgage interest rates of under 2% is not on the horizon, rates that many borrowers might recall from their previous deals. Before the rise in rates began in December 2021, a decade of low household borrowing costs was prevalent.
Recently, Bank of England Governor Andrew Bailey indicated that interest rates are unlikely to decrease until there is "solid evidence" of decelerating price increases. This marks the first time the Bank has acknowledged the persistence of higher interest rates.
Chancellor Jeremy Hunt also acknowledged that rising interest rates would be a concern for families with mortgages and businesses with loans, but reiterated the government's commitment to lowering inflation.
A more substantial than anticipated drop in June's inflation has significantly impacted rates, and lenders are alert to any shifts in forecasts concerning the broader economic climate.
Recent research from the Royal Institution of Chartered Surveyors (RICS) indicated that the surge in mortgage rates was already impacting consumers. The survey suggested that British house prices experienced their most widespread declines since 2009 in July.
Higher interest rates are also affecting renters. With landlords facing squeezed incomes, RICS warned that rents could continue to rise as they seek to pass on any increases to tenants. Alternatively, landlords might choose to sell, resulting in fewer properties available for rent. Photo by Mtaylor848, Wikimedia commons.