Mortgage Lenders Slash Rates by 0.4% as 'Price War' Heats Up

Nikka Sulton

Mortgage Lenders Slash Rates by 0.4% as ‘Price War’ Heats Up

More major lenders have announced cuts to mortgage rates, following several big banks. First Direct, Nationwide, and Coventry Building Society have all revealed significant reductions in borrowing costs, easing the burden for both homeowners and first-time buyers.

Mortgage rates have remained high due to the Bank of England’s multiple base rate hikes aimed at combating inflation. The base rate, used by banks to set interest rates for borrowing, including mortgages, has stayed at 5.25% since August last year.

Millions of homeowners have faced higher rates after coming off deals they initially fixed when rates were low, and first-time buyers have found it increasingly difficult to get on the property ladder. The recent cuts from these lenders are a welcome relief, though the overall rate environment remains challenging.

The reduction in mortgage rates by these lenders signals a potential shift in the market, providing some optimism for those looking to purchase a home or refinance their current mortgage. However, with the base rate still high, the long-term impact on the housing market remains uncertain.

Homeowners and prospective buyers will need to stay vigilant and informed about further changes in the mortgage landscape as the Bank of England continues its efforts to manage inflation.

Since inflation fell to 2% in May, there are expectations that the Bank of England might cut interest rates next month. This anticipation has led to a wave of mortgage rate reductions from several major banks.

First Direct is the latest to join the ranks, cutting rates by up to 0.17%. The bank has reduced rates across its range of two, three, and five-year fixed repayment mortgages, targeting both first-time buyers and home movers. For instance, a two-year fixed-rate deal for borrowers with a 15% deposit has been reduced from 5.16% to 4.99%. These changes are expected to ease the financial burden for many homeowners and prospective buyers.

Nationwide has also announced reductions, with selected rates cut by up to 0.3%. Their new rates now start from 4.18%, providing more affordable options for those looking to enter the housing market or refinance their existing mortgages. Coventry Building Society has followed suit, making similar cuts to their mortgage rates, further intensifying the competition among lenders.

These rate cuts come at a crucial time as millions of homeowners have been facing higher rates after their initial fixed-rate deals ended. The rising costs have made it challenging for first-time buyers to get on the property ladder. The Bank of England’s base rate, which influences borrowing costs, has remained at 5.25% since August last year. This stability, combined with recent rate cuts, brings some relief to borrowers.

In summary, with inflation showing signs of easing, lenders are making significant cuts to mortgage rates. This move aims to alleviate the financial strain on homeowners and first-time buyers, making homeownership more accessible amidst the ongoing economic challenges.

Adding to the list, Skipton has cut mortgage rates by up to 0.33%, and Virgin Money has reduced rates by up to 0.22%. Coventry Building Society has also announced rate cuts, set to launch on Thursday, with further details to be revealed. Gen H, a residential mortgage lender founded in 2019, has also reduced rates by up to 0.4%.

The exact rates borrowers can get depend on various factors, including income, loan amount, and credit score. As competition heats up in the mortgage market, lenders are vying for customers by offering more attractive rates. A wave of rate drops last week brought good news for homeowners and first-time buyers who have been hit hard by rising interest rates.

Halifax, HSBC UK, Barclays, Santander, NatWest, and Yorkshire Building Society were among those to shake up their ranges, with some lenders cutting their mortgage rates multiple times over the past few weeks.

Jack Tutton, director at SJ Mortgages, commented: “The momentum for rate cuts continues as Nationwide and Virgin follow several other lenders last week. The price war is now well and truly on. With Nationwide reducing some of their rates by 0.3 per cent, this should push more lenders into making further cuts to remain competitive. This is yet more positive news for borrowers.”

In summary, with inflation easing, lenders are making significant cuts to mortgage rates. This move aims to alleviate the financial strain on homeowners and first-time buyers, making homeownership more accessible amidst ongoing economic challenges.

Recent reports indicate a notable uptick in the availability of mortgage products. Moneyfacts reported a total of 361 mortgage options for those with 5% deposits as of early July, marking the highest figure since May 2022. This increase is particularly encouraging for first-time buyers, who often face challenges due to smaller initial deposits compared to existing homeowners. The improved availability is complemented by more competitive rates, which not only lower monthly repayments but also expand the range of choices for borrowers seeking suitable mortgage solutions.

Simon Bridgland, director at Release Freedom, commented on the recent developments, stating, “The recent decline in interest rates has been met with a collective sigh of relief from borrowers who have been patiently awaiting the next potential base rate cut. However, it appears that immediate rate reductions may not materialise just yet, highlighting the need for continued patience in the market.”

Nikka Sulton

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