Britain’s biggest mortgage lender has cut mortgage rates for a second time this week.
Halifax is lowering rates by 0.19 per cent on Wednesday after cutting rates by 0.23 per cent earlier this week.
It follows other major lenders, including NatWest, HSBC and Barclays all reducing their rates in the past few weeks following the stability of swap rates.
These are based on long-term predictions for where the Bank of England interest rate – the increase the Bank charges on its lending to commercial banks – will go in the future.
Smaller firms have also started cutting rates, including Clydesdale Bank, by up to 0.18 per cent, and The Mortgage Works, by up to 0.3 per cent.
Nick Mendes, from brokers John Charcol, said: “Halifax has made further rate reductions to their product range, targeting home movers and first-time buyers in response to market competition.
“Recently, many lenders have been repricing their offers in the run-up to the election, aiming to capitalise on the brief respite as buyer activity picks up again. With little expectation of significant incentives from the prospective Labour government, buyers have reengaged with the market after a short pause.”
Swap rates have fallen across the board on Tuesday, reflecting market expectations of potential easing in monetary policy by the Bank of England.
However, experts say the property market will see much better rates after interest rates come down, something that is expected later this year, with some hoping it will be as early as the Bank’s next Monetary Policy Committee (MPC) meeting in August.
Andrew Montlake, of Coreco mortgage brokers, said: “With the market having slowed slightly in recent weeks and market expectations of a rate cut growing, some lenders have taken the opportunity to reduce their interest rate offerings now and encourage more applications.
“Whilst they may not quite be the ‘Summer Sizzlers’ of yesteryear, borrowers will nonetheless welcome rate reductions with open arms, especially those who believe that June may well mark the calm before the storm.
“A stable government, focused housing policies and the potential for an interest rate cut in August or September, could see a huge amount of pent-up demand unleashed and house prices increase further.”
Although more reductions are expected, experts say they are likely to be small.
“I suspect we will see other lenders follow suit, but this is more likely to be a glacial reduction rather than anything sudden and dynamic. The keys to recovery in the mortgage market are very much in the hands of the Bank of England, and we hope they get the engine roaring soon rather than letting it rust.”
Mortgage rates are unlikely to fall below 4 per cent over the next 12 to 18 months even if interest rates are cut, Richard Donnell, head of research and insight team at Zoopla, told i.
He said: “Most people are expecting the base rate to level out at 3.25 per cent on average for the next five years, which will mean we see mortgage rates of between 4 and 5 per cent once banks’ margins are added on top.”
He is one of several experts that have warned homeowners will have to accept a new normal for interest rates.
