Two major mortgage lenders are cutting rates on Friday following weeks of banks increasing their prices.
HSBC and Barclays will cut their rates from Friday in what mortgage broker say is “positive” news for homeowners.
Barclays will cut its cheapest five-year fixed mortgage – for those with large deposits or equity – from 4.47 per cent to 4.34 per cent, as well as making other reductions.
HSBC will drop rates on a range of two-year and five-year fixed deals, although it has not yet given details of how much it will cut them by.
The moves will cheer Chancellor Jeremy Hunt and Prime Minister Rishi Sunak who are hoping the benefits of an improved economy will be felt in people’s pockets in good time for the general election, expected in October or November.
There had been fears that expected Bank of England interest rates cuts would come too late in the year for the impact to be felt.
The Chancellor and Prime Minister are hoping that an improving economy will help voters accept their case that their economic “plan is working”.
The mortgage rate changes come after the Bank of England’s Monetary Policy Committee (MPC) opted to keep interest rates at a 16-year high of 5.25 per cent last week, but with two members voting to cut rates, compared to just one at the last meeting.
Leading up to this, higher-than-expected inflation figures had caused swap rates – which determine the rates at which banks lend to one another – to rise, which had a knock-on effect on the pricing of mortgages.
In April there was a slew of increases, from nearly all the major banks, but now, brokers say calming swap rates have allowed lenders to cut prices.
Nick Mendes of John Charcol brokers said: “Following last week’s announcement that the bank rate would remain unchanged, there has been a noticeable shift in the swaps market.
“Financial markets have adjusted their forecasts, signalling a potential end to the recent trend of lenders increasing their rates. As most lenders have raised their rates in recent weeks, there is now significant potential for rate reductions in the coming fortnight.”
He said the downwards moves would “be expected to prompt similar actions from other lenders.”
“This move is anticipated to increase competition among lenders, potentially leading to more favourable mortgage rates for consumers.”
Talking about the Barclays changes, Aaron Strutt of brokers Trinity Financial, added: “Barclays normally offers decent deals and with these changes they will back up towards the top of the best buys.”
According to financial analytics firm Moneyfacts, the average two-year mortgage deal is 5.92 per cent, and for five-year deals the number is 5.49 per cent.
Rates were lower than this at the start of 2024. On 22 January, the average two-year rate was 5.59 per cent and the average five-year fixed mortgage rate was 5.22 per cent.
Brokers have warned that most households are unlikely to see rates of below 4 per cent again this year, but those with large amounts of equity or large deposits may be able to.
The Bank of England is next set to vote on whether to cut interest rates at the end of June.
