24 June: The market is anticipating a reduction in the Bank of England's Bank Rate on 1 August, leading several lenders to cut their fixed-rate mortgage deals.
Barclays is leading the charge, reducing the cost of selected fixed-rate residential deals for home purchases by up to 0.31 percentage points, effective from tomorrow (25 June). MPowered Mortgages has followed suit, announcing cuts of up to 0.15 percentage points across its fixed-rate range for both purchase and remortgage, effective today (24 June).
These adjustments come after similar rate reductions by NatWest and the Coventry and Suffolk building societies at the end of last week. More lenders are expected to follow suit in the coming weeks, reflecting the growing expectation that the Bank of England will lower interest rates at its next Monetary Policy Committee (MPC) meeting on 1 August.
Barclays' New Rates
Barclays has made significant cuts to its fixed-rate deals:
Two-Year Fixed-Rate Deal for Purchase: Reduced from 4.99% to 4.68% for borrowers with at least a 40% cash deposit (60% LTV), with an £899 product fee.
85% LTV Two-Year Fixed-Rate Deal: Reduced from 5.14% to 4.93% with an £899 fee, and the fee-free option down from 5.33% to 5.15%.
Five-Year Fixed-Rate Deal for Purchase: Lowered from 4.41% to 4.23% on 60% LTV deals with an £899 fee, and from 4.53% to 4.38% for 75% LTV deals.
MPowered Mortgages' Adjustments
MPowered has cut its rates across all two-year fixed-rate residential deals:
Two-Year Deals: Start from 4.76% (60% LTV), down from 4.87%, with a £999 product fee. Fee-free two-year deals now start from 4.99% (down from 5.09%).
Five-Year Fixed Rate for Home Purchase at 65% LTV: Drops from 4.53% to 4.47% with a £999 fee. The fee-free equivalent rate is cut from 4.63% to 4.55%.
Mark Harris, chief executive at broker SPF Private Clients, commented, "Borrowers will be encouraged by a big lender such as Barclays cutting its rates and others could well follow suit. We expect lots of change over the coming weeks. With inflation hitting the 2% target, there will be pressure on the Bank of England to start reducing interest rates at its next meeting in August but lenders could already have reduced their mortgage rates further by then, which will be welcome news for hard-pressed borrowers.”
Recent Trends and Predictions
20 June: NatWest reduced fixed-rate mortgage deals by up to 0.17 percentage points ahead of the Bank of England's Bank Rate announcement. Despite the Bank Rate being held at 5.25%, there is an expectation for a reduction at the next MPC meeting on 1 August, likely bringing it down to 5%.
NatWest has also agreed to acquire Sainsbury’s Bank's retail banking arm, which will add around one million customer accounts to NatWest's portfolio by next year.
NatWest’s updated rates include:
Five-Year Fixed Rates for Remortgage: Starting from 4.26% for an online mortgage deal at 60% LTV, with a £1,495 fee.
Two-Year Online Only Deal: Starts from 4.82%.
Standard Five-Year Fixed Rates for Home Purchase: Start from 4.40% with a £995 fee (60% LTV).
Virgin Money made adjustments to its fixed-rate mortgage deals on 20 June. It slightly increased the rate on its five-year fee-free purchase deal at 75% LTV from 4.66% to 4.67%. However, it reduced rates for higher LTVs:
Five-Year Fee-Free Fixed Rates for Purchase at 90% LTV: Cut from 5.09% to 5%.
95% LTV Deals: Reduced from 5.4% to 5.35%.
Virgin's buy-to-let mortgage deals saw more significant cuts of up to 0.31 percentage points on selected rates.
Suffolk Building Society also reduced rates on its buy-to-let mortgage deals by up to 0.3 percentage points, benefiting ex-pat buy-to-let and holiday homes for UK nationals living overseas.
Market Outlook
With the expectation of a Bank Rate cut on 1 August, lenders are adjusting their mortgage rates to stay competitive and attractive to borrowers. The adjustments are particularly beneficial for those looking to purchase or remortgage, with significant rate reductions across various LTV brackets. This trend is likely to continue, providing some relief to borrowers facing high mortgage costs amid rising living expenses.
14 June: Borrowers With Small Deposits Face Rising Costs
Borrowers with smaller deposits or limited equity in their homes are experiencing increasing costs as major lenders adjust their mortgage rates. TSB has notably increased the rates on selected fixed-rate deals by up to 0.35 percentage points. This move follows Clydesdale Bank, part of Virgin Money group, which also announced rate hikes, particularly for high loan-to-value (LTV) loans.
TSB's Rate Increases
Fee-free two-year residential remortgage fixed rates: At 85% and 90% LTV, rates have risen by 0.15 percentage points, now starting from 6.24% (85% LTV).
Two-year remortgage fixed rates with a £995 fee: At 80% and 85% LTV, these rates are up by 0.05 percentage points, starting at 5.74%.
Five-year remortgage fixed rates with no fee: Up to 75% LTV, rates have increased by 0.1 percentage points to 4.99%.
Three-year fixed-rate range: Withdrawn for residential borrowing, purchase, home mover, and remortgage.
Coventry Building Society's Rate Cuts
In contrast, Coventry Building Society has reduced rates on two, three, and five-year residential deals by up to 0.3 percentage points, benefiting new and existing borrowers, including those with just a 5% deposit.
Five-year fixed rate for purchase: Now 4.8% (85% LTV) with a £999 fee.
Five-year fixed rate for remortgage: 4.82% with no fee (85% LTV).
13 June: FCA Reports on Emergency Support for Mortgages
Clydesdale Bank has increased selected fixed-rate mortgage deals, especially those for borrowers with smaller deposits. However, it also plans cuts for other fixed rates for residential purchases and remortgages.
Five-year fixed rates at 95% LTV: Rates up by 0.2 percentage points to 5.54% with a £999 fee.
Two-year fixed rate at 90% LTV: Increased by 0.15 percentage points to 5.34% with a £1,499 fee.
More than 1.1 million borrowers have benefited from the Mortgage Charter scheme, set up in June 2023 to help those struggling with higher interest rates and mortgage costs. The scheme includes commitments like:
No repossession within one year of the first missed payment.
Ability to lock in new mortgage deals up to six months in advance.
Options for interest-only payments or extended loan terms to reduce monthly costs.
12 June: Market Divides Over Likelihood Of Bank Rate Reduction
Santander has cut rates on selected fixed-rate deals, providing relief for borrowers seeking new home loans. The bank's adjustments include:
Five-year fixed rate for home purchase (60% LTV): Reduced from 4.38% to 4.28%.
Two-year fixed rate for purchase (85% LTV): Cut from 5.18% to 5.11%.
This comes amid market speculation that the Bank of England might delay cutting interest rates until August. The Bank's Q1 2024 data shows a 30.8% increase in new mortgage commitments, indicating potential growing confidence in the housing market.
11 June: Focus Shifts to August Bank of England Decision
Barclays and Halifax have announced rate increases for selected fixed-rate deals:
Barclays: Five-year fixed rate for remortgage (75% LTV) increased from 4.45% to 4.65%.
Halifax: Minor increases of 0.05 percentage points on selected two and five-year fixed rates for first-time buyers and home movers.
Meanwhile, NatWest has made mixed changes, cutting some buy-to-let rates while increasing others. The market is adjusting to rising swap rates and the likelihood of a delayed interest rate cut from the Bank of England.
6 June: Lenders Respond to Wholesale Market Trends
TSB and Skipton Building Society have adjusted their rates in response to rising swap rates, which are influenced by expectations around the Bank of England's interest rate decisions.
TSB: Two-year and five-year fixed rates for first-time buyers and home movers increased by up to 0.2 percentage points.
Skipton: Increases in selected five-year fixed-rate deals, including a rise in its 100% LTV Track Record mortgage.
Other lenders, including Virgin Money and Vida Homeloans, have also made adjustments, reflecting the evolving mortgage landscape and borrower needs.
4 June: High LTV Deals Withdrawn by Smaller Lenders
HSBC has increased rates across its residential and buy-to-let mortgage ranges, with new remortgage rates starting from 4.99% for a two-year fixed rate (60% LTV) with a £999 fee. Smaller lenders like Hanley Economic, Principality, and Saffron building societies have withdrawn high LTV deals, but experts suggest this is not a trend to be overly concerned about.
UK Finance reports a rise in long-term mortgages, with 21% of first-time buyers opting for 35-year terms to make payments more affordable, reflecting ongoing adjustments in the mortgage market to meet borrower demands.
