Coventry Building Society is following a number of major lenders and is cutting rates this week.
The lender will be lowering two, three and five year fixed rates as of Thursday although it has not yet said by how much the reduction will be.
It follows HSBC, NatWest and Barclays all cutting rates in the past week.
Smaller lenders are also taking note with MPowered Mortgages revealing this week it has cut rates on a number of its fixed-rate mortgage deals in response to last week’s interest rate decision. Kensington and Virgin Money have also reduced rates on certain fixed-rate mortgage deals.
Many lenders may feel like now is the time to cut rates following the stability of swap rates.
These are based on long-term predictions for where the Bank of England interest rate – the interest the Bank charges on its lending to commercial banks – will go in the future.
Jed Newton, director of brokers Trinity Financial, said: “As swap rates have decreased steadily over recent weeks, we are starting to see this feed through to mortgage products. We have seen several major lenders decrease rates and I expect other to follow. This will be welcome news for consumers.”
It comes after the Bank of England decided to keep interest rates at 5.25 per cent last week.
On 20 June, the Bank’s Monetary Policy Committee (MPC), led by Andrew Bailey, voted 7-2 to keep interest rates on hold.
The MPC’s next interest rates vote is in August, with many analysts anticipating a reduction in the base rate amid falling inflation.
Nick Mendes of brokers John Charcol said: “Given that most recent lender repricing has involved increases, there is now potential for reductions. We can anticipate that lenders will escalate their strategies significantly over the next few weeks.
“Following last week’s Monetary Policy Committee (MPC) decision and with important wage data and general election results on the horizon, markets are likely to anticipate further reductions in bank rates.”
Swaps have held steady at 5.2 per cent since May 7 – the longest stable period since the benchmark’s inception in 1997.
Mendes added: “This stability has enabled lenders to avoid continuous repricing and focus on enhancing their service levels in preparation for the next repricing battle, reminiscent of earlier this year.”
He believes there will be more repricing as of next week.
However, Rachel Springall, a finance expert at Moneyfacts, said that it may be some time before all lenders make moves to cut their rates.
“It is likely borrowers will wish to see more lenders step up to slash fixed rates, but it might be too soon to see a flood of rate cuts. It can take a couple of weeks for lenders to price in swap rate volatility, so borrowers may have to be patient.
“Even if there are growing expectations for the Bank of England to cut base rate in August, some of the biggest lenders may hold tight on making notable cuts in anticipation until their peers make a move.”
