Major high street lenders have slashed mortgage rates ahead of the Bank of England’s interest rate decision tomorrow.
Natwest, HSBC, and TSB are the latest lenders to lower their mortgage rates, and the cheapest fixes are now closing in on 4%. This is the second time this month Natwest has cut its rates with homebuyers with a 40% deposit now able to secure a 4.07% deal on a five-year fix. If they have 40% equity in their home, those looking to remortgage can get a five-year deal of 4.08% with Natwest. Both of these deals come with a £1,495 fee.
Mike Staton, director at Mansfield-based Staton Mortgages, claims NatWest is looking to attract customers with longer fixes as rates could be much lower this time next year. Speaking to the news agency Newspage, he said, “Welcome to the mortgage domino rally. NatWest’s reduction of all five-year fixed rates is an attempt to lure clients into locking into long-term deals before rates start to drop.
“I strongly believe the base rate will be around the 3% mark this time next year, so this move will safeguard NatWest’s profit margin for the next five years.”
David Stirling, independent financial advisor at Belfast-based Mint Mortgages and Protection noted that the “second sweep of reductions” could see borrowers “rubbing their hands cheerily”. as it followed cuts from Halifax, Santander and Barclays last week.
Santander cut rates by up to 0.23 percentage points across more than 70 mortgage deals, while Barclays cut rates by up to 0.14 percentage points. Yesterday, TSB announced further cuts to its mortgage rates of up to 0.25 percentage points across a range of its fixed-rate products from today.
HSBC has cut a range of mortgage products for those buying with bigger deposits or those remortgaging with high levels of equity, however, it is increasing rates for those with less to put down. David Stirling added: “HSBC were the first lender to tinker with their rates on Monday in what should prove to be a very active week as banks actively compete for applications to kickstart their targets for next year.
“HSBC is cherry-picking the borrowers they want, as they decrease rates for those with a bigger deposit and increase rates at higher loan-to-values.”
The Bank of England’s Monetary Policy Committee (MPC) will announce its latest interest rate decision on Thursday. However, today, it was revealed that inflation in the UK had risen to 2.6% from 2.3% recorded in October. According to the Office of National Statistics (ONS) the rise was driven by the cost of petrol, groceries and an increase in tobacco duty in the budget.
With the rise, all eyes will be on tomorrow’s decision. According to reports, the central bank is widely expected to hold rates at 4.75% rather than cut them, although many are still pushing for a cut. Paul Nowak, the general secretary of the Trades Union Congress, said that despite the recent rise, inflation had come down more quickly than anticipated over the past year. “Families and businesses remain under pressure from the steep increase in the cost of living.
“The latest GDP and employment figures show the economy is still fragile, and the priority must be turning this around. So, it’s vital the Bank of England keeps moving and makes another interest rate cut tomorrow.”