Two more major high street banks have announced significant mortgage rate cuts, pushing some deals below the 4 per cent threshold. This news is likely to be welcomed by borrowers who have faced months of rate hikes and uncertainty.
Santander has confirmed that from tomorrow, it will be reducing rates by up to 0.21 percentage points across a range of its mortgage products. These reductions will apply to those moving home, first-time buyers, and individuals looking to remortgage, making the lender more competitive in a cooling market.
At the same time, HSBC has implemented its own rate cuts, which came into effect today. These changes will benefit a wide range of customers, including homeowners and landlords, with significant reductions offered across much of its mortgage range.
HSBC is reducing nearly all of its mortgage deals, with the largest cuts reaching up to 0.24 percentage points. These reductions apply to both new homebuyers and existing customers whose current fixed-rate periods are nearing their end and are looking for more affordable options.
Among HSBC’s revised offerings, one of the standout deals is a two-year fixed rate for buyers putting down a 15 per cent deposit. This deal now offers a 4.67 per cent interest rate with no product fee, which may prove appealing to those looking to reduce upfront costs.
For its Premier Banking customers, HSBC has introduced a highly competitive sub-4 per cent mortgage deal. This product is aimed specifically at those remortgaging with at least 40 per cent equity in their property. The new deal offers a 3.99 per cent fixed rate, although it does come with a £999 product fee.
These rate changes reflect a broader trend among lenders responding to increased competition and improving financial market conditions. It also signals a shift in sentiment, with lenders eager to attract new customers and retain existing ones amid signs of stabilisation in the mortgage market.
Santander has also confirmed a series of reductions across its own product range. First-time buyers will see fixed rates drop by up to 0.17 percentage points, offering a bit more breathing space as affordability remains a major concern for many entering the market for the first time.
Home movers will also benefit from Santander’s changes, with some fixed-rate products being cut by as much as 0.13 percentage points. Buyers of new build homes could see even greater reductions, with rates falling by up to 0.21 percentage points depending on the specific product.
For those remortgaging, Santander is trimming rates on several of its two-year fixed deals by up to 0.18 percentage points. A number of its five-year fixed options will also see decreases of up to 0.12 percentage points, helping to improve long-term affordability for borrowers planning to stay put.
As of tomorrow, a significant change will take place in the mortgage market, with certain banks now offering sub-4 per cent fixed rates. This development is expected to benefit home movers, particularly those with a larger deposit. For home movers with a 40 per cent deposit, they will have access to a two-year fixed rate at an attractive 3.97 per cent, as well as a three-year fixed rate at 3.99 per cent.
For example, if a borrower were to secure a £200,000 mortgage at 3.97 per cent with a 25-year repayment term, their monthly payments could be expected to total around £1,052. This represents a potentially significant saving compared to previous rates, especially as borrowers have been faced with higher monthly payments due to previous interest rate increases.
This move follows a broader trend in the mortgage market where several lenders have recently reduced their rates. With expectations growing that interest rate cuts will continue at a faster pace, this latest round of rate reductions could provide much-needed relief for those looking to secure a more affordable deal.
The recent mortgage rate cuts are not isolated, as they follow news from Lloyds Banking Group, which made headlines by relaxing its mortgage lending rules. As part of these changes, typical households could now be in a position to borrow up to £38,000 more than they would have previously been able to.
This shift has the potential to significantly improve the borrowing capacity of many customers. The changes apply to customers of all four banks within the Lloyds Banking Group—Lloyds, Halifax, Bank of Scotland, and BM Solutions—enabling a greater number of borrowers to access larger loans. The revised criteria could also make it easier for buyers to afford their desired property.
According to reports, the typical customer could expect to see an increase of up to 13 per cent in the maximum loan available. This is a notable jump that could open up more opportunities for prospective homeowners and those looking to remortgage. It could also stimulate further activity in the housing market, as higher borrowing potential could encourage more buyers to enter the market.
In addition to these changes from Lloyds, Santander has made its own adjustment in the past month, lowering its stress test rates by 0.75 per cent. This move is expected to make mortgages more accessible to a wider range of customers. Santander’s changes have brought its stress test rates down to the lowest levels since 2022, a move that will likely have a direct impact on the affordability of mortgages for many borrowers.
Hina Bhudia, a partner at Knight Frank Finance, shared her perspective on these developments. She pointed out that lenders are keen to secure new business after experiencing several years of below-par results. As a result, they are offering competitive deals, including interest rate cuts and more relaxed affordability criteria, in an effort to win over customers.
Bhudia explained that the current lending push is happening at a time of significant economic uncertainty. Lenders are motivated to act now, as they have room to make rate cuts while market conditions allow it. However, the sustainability of these changes will depend largely on external factors such as the trade war’s progression, which could affect bond market stability, investor sentiment, and inflation rates.
This uncertainty means that while the current environment is favourable for borrowers, the long-term stability of these reduced rates is far from guaranteed. Economic factors, including inflation and geopolitical tensions, could alter the mortgage landscape considerably in the coming months. As such, borrowers are encouraged to carefully consider the long-term implications of their mortgage choices before committing to any fixed-rate deal.
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