Nationwide, Santander and Barclays are among a number of lenders to have cut prices and experts say this could be a signal of an impending interest rate cut.
There has been a flurry of rate cuts this week with TSB, HSBC and Principality Building Society also reducing prices as lenders become competitive ahead of the summer holidays.
There were some eye-catching deals for first-time buyers, with Nationwide’s stand-out price cuts including a new rate of 3.94% for those stepping onto the property ladder.
This sub-4% rate is only available for those with a generous 40% deposit and the deal comes with a £1,499 fee. However, for those buyers with a smaller deposit a rate of 4.39% is now available on a 90% loan-to-value (LTV) deal which is for those with 10% to put down. This product is a five-year fixed rate and comes with a £999 fee.
For movers the headline product is a two-year fixed rate at 60% LTV with a £1,499 fee and a rate of 3.81%.
Santander has also provided new, lower prices for first-time buyers, as well as others. There’s a two-year fixed rate deal with a 4.02% rate for those stepping onto the property ladder with a 25% deposit and for those with a smaller 15% deposit there’s a 4.21% rate. These come with £999 fees but some of the first-time buyer products benefit from cashback.
With many other lenders also making cuts, anyone taking out a mortgage today will certainly be reaping the rewards of the competitive mortgage market.
According to Moneyfacts data published this morning the average two-year fixed mortgage rate today is 5.07% – down from 5.09% yesterday. Meanwhile, the average five-year fix is 5.06% today compared to 5.08% yesterday.
So what is driving these cuts? And will there be more?
Nicholas Mendes, mortgage technical manager at John Charcol, said it’s happening in response to falling swap rates. These are used by lenders to set their pricing and therefore heavily influence their rates.
And he thinks it’s a sign that interest rates will be cut when the Bank of England’s decision makers next meet on 7 August.
He added: “While swap rates are moving down and markets remain reasonably confident that the Bank of England will cut the base rate at some stage this year, the next cut in August is looking increasingly likely.
“It’s important to remember, though, that fixed mortgage rates are primarily influenced by swap rates, which are driven by what markets expect to happen with interest rates in the future, rather than by the base rate itself.
“One thing that’s clear is that borrowers shouldn’t become complacent. Sitting on a lender’s Standard Variable Rate or delay committing to a new deal as you approach the end of your current fixed rate in the hope that fixed rates will fall further is risky.”
Should borrowers wait for further price cuts?
Whilst no one can say with certainty what will happen to interest rates going forward, there may still be borrowers who are hoping for further rate cuts before committing to a mortgage.
Mendes said for borrowers looking for flexibility, shorter-term fixed rates have become a useful option.
“Many lenders are now offering products lasting 12 to 18 months, which provide a good balance between keeping options open and offering protection against sudden rises,” he said.
“Tracker products are also very much back in favour. They typically start lower than SVRs and often come without early repayment charges, giving borrowers the flexibility to lock into a fixed deal later if rates fall.
“The key message for borrowers right now is not to try and second-guess the market. Most lenders will allow you to secure a rate up to six months in advance, meaning you can lock something in today as a safety net but still switch to a better deal if rates improve before completion.”
