Battle for best mortgage deals as borrowers given 'good news' that could cut monthly payments

Mortgage rates have soared
-Credit: (Image: Yui Mok/PA Wire)

Britain's biggest banks are chopping the mortgage rates on offer as competition to attract borrowers heats up over the summer. Halifax, HSBC UK, Barclays, Santander and NatWest are among those to shake up their ranges this week.

It could bring some relief to borrowers scouring for a better deal, although in the higher interest rate environment many people looking to re-mortgage will still find rates are significantly higher than those they have previously been paying. Some 1.6 million mortgages are coming off fixed rates this year, according to UK Finance.

Barclays has announced it is reducing rates on a selection of products from Friday, including in its residential and buy-to-let ranges. HSBC UK also plans to snip some rates in its mortgage product ranges from Friday, and will give further details on the day.

Those who may see HSBC's rates fall include existing customers looking to switch or borrow more, as well as first-time buyers and home movers. Santander reduced selected fixed rates for home buyers on Thursday, by up to 0.16 percentage points.

Yorkshire Building Society also said on Thursday it has reduced its mortgage interest rates by up to 0.20 percentage points "with immediate effect". Its deals include a five-year fixed rate at 4.84%, which was previously 4.99%, for re-mortgage purposes, at up to 80% loan-to-value (LTV) with a £1,495 fee, free valuation and free re-mortgage legal work.

Ben Merritt, the Yorkshire's director of mortgages, said market conditions have allowed it to reduce rates on several products across its range.

He added: "We will continue monitoring developments closely over the coming weeks, in order to ensure our mortgages remain as competitive as possible."

Lending giant Halifax cut rates on Wednesday on a range of home buyer fixed-rate mortgages by up to 0.19 percentage points. This followed cuts to its re-mortgage product rates last week. Halifax's refreshed range includes a five-year fixed-rate mortgage at 4.26%, reduced from 4.45%, for people with a 40% deposit. The deal has a £999 fee.

On Tuesday, NatWest made a range of rate reductions to both its "new business" and existing customer mortgage ranges. According to financial information website Moneyfacts, the average two-year fixed-rate homeowner mortgage rate on the market is 5.93%.

This is down from an average rate of 5.94% on Wednesday. The average five-year fixed residential mortgage rate is 5.51%. This is unchanged from the previous working day.

Moneyfacts counted 6,739 homeowner mortgage products on the market - a number which has increased from 6,736 products on Wednesday. The Bank of England base rate has been held at 5.25%, but with Consumer Prices Index (CPI) inflation recently hitting its 2% target, there are expectations of a base rate cut on the horizon.

There have also been some signs of the housing market picking up. HM Revenue and Customs (HMRC) figures recently showed the number of UK house sales increased for the fifth month in a row in May.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "With the big five lenders - Barclays, HSBC, Santander, Halifax and NatWest - reducing their mortgage rates this week, lenders continue to jostle for business as they ramp up the summer sales. Those lenders who haven't yet repriced are likely to follow suit, as long as service levels allow.

"Even though swap rates, which underpin the pricing of fixed-rate mortgages, are not showing a consistent downwards trend, the need to generate more business seems to be motivating lenders to tweak their rates. It's good news for borrowers, many of whom are struggling with affordability after successive rate rises and then holds. Expectations of a rate reduction in August are high."