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Banks (Finance)

Mortgage Rates Plummet as Britain's Big Six Banks Engage in Price War

Strategic Insights

— 2 min read

In a highly competitive move, Britain's six biggest banks have significantly reduced their mortgage rates in the past fortnight, citing the steady inflation data and a fall in swap rates. This development comes as the Bank of England's monetary policy committee is expected to cut interest rates on Thursday. With inflation at 3.8% and a forecasted decrease in the base rate, lenders are seeking to capture a share of the market before the upcoming budget on November 26, which is expected to slow down the mortgage and property markets.

Key Takeaways:

  • Five of Britain's six biggest banks have cut their mortgage rates in the past fortnight, with Barclays and HSBC reducing their fixed rates twice.
  • The largest lender, Halifax, followed suit with cuts of up to 0.13 percentage points, while NatWest cut its deals by up to 0.21 percentage points.
  • Santander is due to cut fixed rates by up to another 0.1 percentage points tomorrow, making it a challenging time for lenders to maintain their current prices.
  • Barclays has the cheapest two-year fixed deal for buyers at 3.73% with a PS899 fee, while NatWest offers the lowest five-year fix for homebuyers at 3.9% with a PS1,495 fee.
  • The consumer price index measure of inflation was 3.8% in the year to September, the same as in the year to August but lower than the 4% that had been expected by economists.
  • Lenders are trying to incentivize borrowers to take their mortgages, with prices expected to increase after the budget on November 26.
  • Aaron Strutt from Trinity Financial stated that the upcoming budget is slowing down the mortgage and property markets, and banks are trying to incentivize borrowers.
  • Justin Moy from EHFMortgages said that the rate cut is significant, especially for buyers whose fixed deals are due to end over the next six months.
  • Homeowners can protect themselves from rises by reserving a rate with a new lender up to six months in advance or a product transfer with their lender three to six months before their deal ends.

Statistics:

  • The lowest two-year fixed deal for buyers at Barclays is 3.73% with a PS899 fee.
  • NatWest offers the lowest five-year fix for homebuyers at 3.9% with a PS1,495 fee.
  • The base rate is currently 4%, and financial markets expect it to be cut more quickly than predicted.
  • There has been a fall in swap rates, which has resulted in expectations of the future Bank of England base rate being cut more quickly than predicted.
  • The consumer price index measure of inflation was 3.8% in the year to September.
  • About 950,000 homeowners will have their fixed deals end over the next six months, according to the Financial Conduct Authority.

Sources:

  • "Byline: George Nixon Five of Britain's six biggest banks have cut their mortgage rates in a price war triggered by good news on inflation."
  • "Aaron Strutt from the mortgage broker Trinity Financial said: 'We have been waiting for the lenders to start reducing their rates again for a while, especially as their funding costs have come down.'"
  • "Justin Moy from the broker EHF Mortgages said: 'It's a small reduction in rates, but it's more about the change of direction. The fact we've had a rate cut for the first time in about four to six weeks is important for a borrower's mood, and I think we'll see more lenders make similar rate cuts.'"

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