Mortgage rates are falling by the day, as an interest rate cut is widely expected next week and lenders compete fiercely for customers.
Today, HSBC cut mortgage rates for the second time this week having already launched more than a dozen fixed rate deals below 4 per cent on Monday.
And next week, Santander has said it will introduce 50 new mortgage products.
This will include reducing interest rates across existing mortgages for home movers, first-time buyers, remortgage customers and buy to let landlords.
It will also begin offering three-year fixed mortgages, as well as the existing two, five and ten.
These changes follow hot on the heels of a number of other major lenders this week.
Home loan price war: HSBC and Santander are latest major lenders to announce they are cutting mortgage rates
On Tuesday, NatWest cut mortgage rates with deals as low as 3.88 per cent for homebuyers, and on Wednesday Barclays also announced a wave of cuts.
Yesterday, Halifax cut its mortgage rates, and now offers the cheapest two-year fix on the market.
The lender has reduced its lowest two-year fixed rate for people remortgaging from 4.10 per cent to 3.79 per cent, which is a best buy.
What are HSBC’s new mortgage rates?
Today’s cuts mean that, for the first time since 2022, all of HSBC’s fixed mortgages aimed at first-time buyers and home movers have rates under 5 per cent.
Those needing to remortgage with at least 40 per cent equity in their home can now get a 3.89 per cent rate on a two-year fix with HSBC, with a £999 fee.
On a £200,000 mortgage being repaid over 25 years, that would cost £1,044 a month.
HSBC is offering even better rates for existing Premier banking customers that already hold a mortgage with them.
This includes a 3.79 per cent two-year fix for those with 40 per cent equity in their home.
First-time buyers also stand to benefit from HSBC’s changes.
Those buying with a 5 per cent deposit can now get a rate of 4.99 per cent with HSBC – and with no fee included either.
On a £200,000 mortgage being repaid over 25 years, that would cost £1,168 a month.
Last but by no means least, HSBC is offering some market leading rates for buy-to-let.
A remortgaging buy-to-let landlord who owns in their personal name can secure a rate as low as 3.79 per cent if they have 40 per cent equity in the property, though they will need to stump up a £3,999 fee.
Excluding the fee, on an interest only £200,000 mortgage rates this would equate to paying £632 a month.
Should you hold off for rates to fall further?
When rates are falling, the temptation can be to hold off and wait for cheaper home loan deals – especially for those remortgaging who don’t need to time their mortgage with a house move.
‘If you are in the position to hold out for a cheaper fixed rate then its probably not a bad idea at the moment with multiple reductions to the base rate expected,’ says Aaron Strutt of mortgage broker Trinity Financial.
‘In the past we have seen fixed rates come down on the back of base rate cuts and with so much economic uncertainty if your can hold you nerve you may well end up with lower monthly repayments.’
However, it’s important to consider your current deal and other circumstances.
Ravesh Patel, director and senior mortgage consultant at Reside Mortgages
If this means slipping on to an expensive standard variable rate when your current fixed deal finishes, this will start to wipe out any savings.
While an interest rate cut is predicted next week, and mortgage rates are forecast to fall, some think they won’t drop dramatically from their current levels.
It is also impossible to predict the future.
Ravesh Patel, director and senior mortgage consultant at broker Reside Mortgages, says: ‘Obviously the rates are going down, which is great news for lots of mortgage holders and new buyers. However, you can’t rely on this trend continuing.’
‘Timing the market rarely works. There is a lot of uncertainty that lies ahead, so if you are looking to buy don’t necessarily hold off.
For those currently in a fixed deal, it is also possible to line up a mortgage in advance, and then switch to another rate later on if a better deal arises.
Patel continues: ‘If you are planning to buy or remortgage in the next six months, it would be a good time to engage with a broker and start looking at the deals you might be eligible for.
‘For example, if you are looking to remortgage within the next six months many lenders will offer you a new deal six months in advance of your remortgage date.
‘If during that six months, the lender’s rates go down, it will usually allow you to move to a better rate.
‘But if the rate goes up during that time, then at least you have secured the best rate possible.’
Why are mortgage rates falling?
Mortgage rates have been falling with the Bank of England now expected to cut interest rates three or four times this year, rather than just twice.
This means that interest rates are forecast to fall from 4.5 per cent to either 3.75 per cent, or more likely, 3.5 per cent by the end of the year.
Fixed-rate mortgage pricing is largely based on Sonia swap rates – the inter-bank lending rate, based on future interest rate expectations.
When Sonia swaps rise sufficiently it often results in fixed mortgage rates going up, and vice versa when they fall.
In little more than a month, two-year and five-year swaps have fallen from above 4 per cent to just above 3.5 per cent.
In what has been a competitive market in which the lowest residential mortgage rates have often trended close to the equivalent swaps, this would suggest there may well be more cuts to come.
However, future interest rate cuts are already ‘baked in’ to fixed rate mortgage pricing to some extent, and the trajectory can change based on future predictions.
