Mortgage deals are on track to fall below 4pc in a boost to homeowners, with a string of banks announcing rate cuts.
The UK’s biggest lender Halifax has reduced its rates by up to 0.13 percentage points and Barclays by up to 0.33 percentage points. The bank’s five-year fixed-rate mortgage is now the cheapest on the market at 4.08pc.
The moves follow a series of cuts from lenders including Natwest and HSBC over the past few weeks, with a rate war starting to heat up.
Adrian Anderson, managing director at Brokerage Anderson Harris said: “Banks will be competing for market share as we enter the summer months which are historically quieter in the property market.
“I will not be surprised to see some five-year fixed-rate mortgages priced below 4pc by the end of the year. With the election behind us and the prospect of lower mortgage rates buyers should have more confidence to purchase.
“Cheaper mortgage rates will have a positive impact on borrowers’ ability and willingness to borrow.”
Lenders Virgin Money and Nationwide have also reduced the rates on their mortgage deals this week. Nationwide has made reductions to selected fixed rates by up to 0.30 percentage points.
While swap rates – the main pricing mechanism for fixed-rate mortgages – have decreased only slightly over the past month, they are now at their lowest point since April. And they are still below the average fixed mortgage rates, so lenders have some space to reduce their prices in order to remain competitive.
The average rate for a two-year fixed, residential mortgage is 5.92pc, according to analyst Moneyfacts. The average five-year fix is 5.50pc.
Aaron Strutt of brokerage Trinity Financial said: “There is more positive news in the mortgage market at the moment with lots of lenders lowering their rates.
“The cheapest five-year fix is priced at 4.08pc which is great especially given the scale of rate hikes we have seen in recent months. If you have secured a mortgage rate as part of a property purchase or remortgage, it is worth checking to see if you can switch to a better deal either with your existing lender or a rival provider.”
The Bank of England chose to hold its bank rate for the seventh time at 5.25pc in June, despite inflation falling to its target of 2pc in May.
The chance of a summer interest rate cut is now in question after the UK economy grew faster than expected in May, economists have warned.
Official data showed that the economy returned to growth as more shoppers returned to high streets and construction work recovered.
The Office for National Statistics said gross domestic product increased by 0.4pc in May, following no growth in April.
The rebound was more positive than had been predicted, with analysts having guided towards a 0.2pc increase.
Economists have suggested that the data will garner attention from Bank of England rate-setters before their next vote on August 1.
The central bank has been widely predicted to launch its first cut since 2020 at the August meeting.
However experts have suggested rate-setters could now be assessing whether the potential rate cut may be pushed back further with the market pricing in that we may have to wait until November for the first reduction.
Mr Anderson added: “Huw Pill, the chief economist at the Bank of England recently confirmed it was a matter of when, not if, rates would be cut, even though hopes of an interest rate cut in August were reduced from circa 60-40 in favour to 50-50 after Huw Pill said he is uncomfortable with the persistence of inflation.
“The markets seem to have reacted well so far to the new Government after encouraging words of optimism from Rachel Reeves regarding the Labour pledge to build circa 300,000 new homes a year.”
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