Yahoo News Mortgage bills fall £160 a month amid rate war
Lenders have kicked off a new year “mortgage rates war” amid hopes the Bank of England will cut borrowing costs.
One of Britain’s biggest mortgage providers, Halifax, cut the rates on some of its mortgages by as much as 0.92 percentage points Tuesday – equivalent to £162 a month on a £300,000 loan with 25 years’ of repayments left.
Leeds Building Society also cut rates by 0.49 percentage points and is now offering a two-year fix at 4.60pc, according to analyst Moneyfacts.
Other lenders, such as Kensington, have withdrawn rates with a view to re-launch cheaper loans.
Mortgage broker Ranald Mitchell, of Charwin Private Clients, said the “unprecedented rate war is well underway” in 2024 and that “seismic moves” were to be expected compared to last year.
He added: “With net mortgage lending predicted to be lower than last year, lenders will be pulling out all the stops – not just to acquire new business, but also to protect their existing customer base.
“Such vying for business, as well as newbuild initiatives being rolled out and pent-up frustration from an inert purchase market last year, could mean lending forecasts are well off the mark.”
Gross mortgage lending across the UK fell by 28pc last year, and is set to fall by a further 5pc this year according to UK Finance, the banking trade body.
James Tatch, head of analytics at UK Finance, said he also only expects a “modest increase” in lending activity come 2025.
Currently, Generation Home – a small fintech lender – is offering the best five-year deal, at just under 4pc. No other lender has yet launched a mortgage deal starting with a three, according to Moneyfacts.
Peter Stokes, of brokerage Davidson Deem, said smaller lenders typically offered the best deals.
He added: “This is undoubtedly down to the big players postponing rate reductions before Christmas, knowing they would be working with a skeleton staff and many brokers would be shut down for the holidays.
“Now we are all back, I fully expect the big hitters to start lowering their rates to reflect the reduced cost of funds. Maybe we will even see the elusive three-point-something, five-year fixed rate [from a major lender] in the coming days.”
The Bank of England is expected to hold the Bank Rate steady at 5.25pc in its meeting next month, but markets are betting on a reduction in May.
Anil Mistry, of brokerage RNR Mortgage Solutions, said this anticipated move could spark “a cascade of mortgage rate decreases” timed for borrowers nearing the end of their current deals.
Darryl Dhoffer, of brokerage The Mortgage Expert, said until this May 2024 decision, it was likely that in the main only mortgages requiring big deposits would be cut.
He added: “The biggest reductions will be on retention products [i.e product transfers].
“Long-term, if inflation continues to fall this does put pressure on the Bank of England to cut rates sooner than maybe forecasted. In this game of rates, nothing is certain except the uncertainty.”
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