Mortgage rates keep falling even as City bets on more Bank of England hikes, with Halifax latest to cut prices
Mortgage rates are continuing to fall even as City traders bet on higher Bank of England interest rates again, with Halifax the latest to cut its prices.
According to Moneyfacts, the average two-year fixed residential mortgage rate today is 6.77%, down from 6.79% yesterday. The average five-year fixed residential mortgage rate today is 6.26%, down from 6.28% .
Those rates could dip further as Halifax, the country’s biggest mortgage lender, was the latest to announce a cut to its rates. The new lower prices for its five-year fixed-rate deals will come into effect from 21 August.
That comes just over a week after Halifax announced its last price cuts.
Clive Read, owner of broker Goldmanread, said others could follow with more reductions.
He said: “As a large national lender, Halifax has the margins and reach to lower rates whilst retaining a profitable mortgage book.
“Aside from that, as part of the largest banking group in the UK, they need to demonstrate that they are supporting UK homeowners and consumers.
“Their move is likely to be followed by the other large lenders in this space though we may not see much movement from the smaller players.”
Jamie Lennox, director at Dimora Mortgages, said one reason for the repeated reductions might be that lenders have fallen far behind their targets after rapidly raising prices in May, June and July.
“It’s great to see the UK’s biggest mortgage lender return with a further reduction on selected products,” he said. “This is a positive boost for the mortgage and property market given that markets are baking in further base rate increases following core inflation remaining sticky. It’s likely that the speed at which rates went up caused a firm halt in the number of new applications being received and we may now see lenders chasing their tails in the months to come to try and make up for being behind on their targets for the year.
“Only time will tell, but we hope to see more to follow.”
The lower rates come even as markets now expect the Bank of England to raise interest rates at least three more times.
A week ago, the City was betting on the Bank of England’s interest rates peaking at 5.75%. However, record wage growth and sticky core inflation mean that traders now see it as a roughly 50/50 chance whether rates peak at 6% or 6.25%.
Mortgage rates are heavily influenced by the expected Bank Rate, as lenders can typically hedge the risk they take on by trading in interest rate swaps.
