NatWest, Halifax, and Virgin Money are the latest lenders to announce reductions in mortgage rates, just before the Bank of England’s base rate decision scheduled for tomorrow. This move comes as part of a broader trend among lenders to adjust their offerings in anticipation of potential changes in monetary policy.
NatWest, which holds the position of the UK’s second-largest mortgage lender, has introduced a cut of up to 15% on its mortgage deals. This significant reduction is aimed at making their mortgage products more competitive in the current market environment, where interest rates and borrowing costs are closely watched by potential homebuyers and those looking to refinance.
Meanwhile, Virgin Money is making more substantial cuts, with reductions of up to 31% on its mortgage rates. In addition to these rate cuts, Virgin Money has rolled out several exclusive deals specifically designed for customers interested in remortgaging. These new offers are expected to attract a range of borrowers looking to take advantage of the lower rates and improve their current mortgage terms.
Halifax is poised to reduce its mortgage rates by up to 33% starting tomorrow, 1 August. This significant adjustment comes ahead of the Bank of England’s Monetary Policy Committee (MPC) meeting, where they will decide whether to keep the base rate at its current level of 5.25% or lower it to 5%. The decision is eagerly anticipated by mortgage holders, who are hoping for a reduction in their borrowing costs.
Economists are divided on the likely outcome of the MPC’s decision. While some predict that the base rate will be cut, others are unsure. However, regardless of the MPC’s choice, mortgage brokers believe that overall rates will continue to decrease. This expectation is based on market trends and the competitive nature of the mortgage lending sector.
Nick Mendes, a mortgage expert at broker John Charcol, anticipates that the downward trend in fixed-rate mortgage costs will persist into the coming year. He attributes this to market expectations of further base rate cuts and the fact that lenders will strive to remain competitive by passing on reductions in swap rates. Mendes projects that fixed mortgage rates could fall below 4% by 2025, with the possibility of a 3.5% rate for a five-year fixed mortgage becoming available by early next year.
Some experts argue that while recent rate cuts are beneficial, they may be insufficient. Ken James, director at Contractor Mortgage Services, remarked, “Rate cuts are always welcome, but I’m concerned that lenders might be running out of options. It seems we are only seeing small reductions now, with substantial cuts not being considered.”
James also noted that lenders might be slow to adjust rates, as they might have already factored in anticipated cuts into their current lending models. He added, “The focus is now on the Bank of England’s decision on Thursday at midday.”
According to HMRC figures, the number of home sales in the UK for June was 8% higher compared to the same month last year. An estimated 91,370 transactions took place, reflecting a year-on-year increase, though it was slightly down by less than 1% compared to May 2024.
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, commented, “The hot, sunny weather combined with buyers who postponed their plans now ready to move has made the housing market quite active.
However, she cautioned that while lower mortgage rates may attract more buyers, they could also lead to higher asking prices. If an influx of new buyers returns to the market due to cheaper mortgages, it is likely that property prices will increase.”