There has been a spate of mortgage rate cuts following a suggestion by the Bank of England (BoE) governor that interest rates have hit their peak.
Yorkshire Building Society has become the latest lender to shave percentage points off its mortgage rates, following hot on the heels of NatWest and TSB.
It comes just days after Andrew Bailey, the governor of the BoE told the Commons Select Committee ‘we are now much nearer to the top of the [interest rate’ cycle].
After Bailey’s speech on Wednesday, there followed several rate cuts from lenders with NatWest making reductions of up to 0.28% on its two and five-year fixed rates for remortgages, first-time buyers and movers.
And TSB also said it would be reducing rates on residential and buy-to-let as well as product transfers and additional borrowing by up to 0.50% as of today.
This morning Yorkshire Building Society said it had taken Bailey’s suggestion the Base Rate had reached the top of its cycle as ‘positive market noises’ and had duly made cuts to its fixed and tracker products.
It said the move had been designed to pass on as much value as possible to borrowers hard pressed by the current high cost of living.
It is reducing its two-year fixed rates by up to 0.20%, its three-year fixes by up to 0.41%, five-year fixes by as much as 0.20%, and it is launching new 10-year fixes with rates 0.23% lower. Many of YBS’s trackers also face reductions of 0.25%.
Ben Merritt, director of mortgages at Yorkshire Building Society, said: “We’ve remained committed to passing on as much value to our borrowers as possible, throughout the market volatility we’ve seen over the past year, and these rate reductions are the latest example of that.
“We hope these latest reductions will go some way towards helping people withstand the current cost-of-living challenges, as positive signals emerge that we could be heading for a more stable interest rate environment overall before too long.”
Rates falling but is it enough?
The spate of reductions following the BoE governor’s words comes on the back of several weeks of gradual rate cuts from lenders and may offer a glimmer of hope to borrowers.
Data from Moneyfactscompare.co.uk showed the average two-year fixed rate is today (Friday 8 September) 6.66%. This compares to 6.70% this time last week.
Meanwhile, the average five-year fixed residential mortgage rate today is 6.15% – a drop from 6.19% last Friday.
But Karen Noye, mortgage expert at Quilter, urged caution to borrowers who interpret Bailey’s comments as being the end of high rates.
She said: “He claimed that the Bank of England were near or at the peak of their interest rate rises but they could stay elevated for longer.
“While the immediate reaction to Bailey’s statements might suggest relief that interest rates may not rise further, it’s essential to delve deeper into the implications of prolonged elevated rates.
“The Bank of England’s intention to keep rates high for an extended period implies sustained pressure on borrowers.
“High-interest rates, though seen as a mechanism to control inflation and stabilise an economy, directly impact mortgage borrowers. Increased monthly repayments can strain household finances, particularly for those who have borrowed heavily.”
