Mortgage Rates in the UK: A Summer of Relief?

As the summer season approaches, the UK’s leading banks are slashing mortgage rates in a bid to attract borrowers. This trend provides some much-needed relief to those seeking better deals, although many re-mortgaging homeowners will still face higher rates than they previously enjoyed in the current high-interest environment.

Mortgage rates are on the move

According to UK Finance, approximately 1.6 million mortgages will transition from fixed rates this year. This has led to a flurry of activity among major lenders, with Halifax, HSBC UK, Barclays, Santander, and NatWest all making significant changes to their mortgage offerings.

“There are a number of factors that are taken into account when setting mortgage rates, and following a review, we are reducing several hundred rates across all of our residential ranges including first-time buyers, home movers, and people looking to re-mortgage from tomorrow.” - HSBC UK spokesperson

Barclays announced it will cut rates on a variety of products starting Friday, including options in its residential and buy-to-let ranges. HSBC UK is also set to reduce rates across several mortgage products from Friday, marking the second rate reduction by the bank in two weeks.

Mortgage applications are on the rise

Santander lowered selected fixed rates for home buyers on Thursday by up to 0.16 percentage points. Yorkshire Building Society also announced an immediate reduction in mortgage interest rates by up to 0.20 percentage points on Thursday.

“We will continue monitoring developments closely over the coming weeks, in order to ensure our mortgages remain as competitive as possible.” - Ben Merritt, Yorkshire’s director of mortgages

Halifax reduced rates on Wednesday for a range of home buyer fixed-rate mortgages by up to 0.19 percentage points, following cuts to its re-mortgage rates last week. NatWest also implemented rate reductions on Tuesday for both “new business” and existing customer mortgage ranges.

The Current Market Overview

According to financial information website Moneyfacts, the average two-year fixed-rate homeowner mortgage currently stands at 5.93 per cent, down from 5.94 per cent on Wednesday. The average five-year fixed residential mortgage rate remains unchanged at 5.51 per cent.

The market now offers 6,739 homeowner mortgage products, a slight increase from 6,736 on Wednesday. Despite the Bank of England’s base rate being steady at 5.25 per cent, the Consumer Prices Index (CPI) inflation recently hitting its 2 per cent target has fuelled expectations of a base rate cut.

House sales are on the rise

Housing Market Indicators

HM Revenue and Customs (HMRC) data indicated a fifth consecutive month of increasing UK house sales in May. This trend is expected to continue, with many lenders jostling for business as they ramp up their 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.” - Mark Harris, chief executive of mortgage broker SPF Private Clients

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.

Mortgage brokers are optimistic about the future

In conclusion, the UK mortgage market is experiencing a summer of relief, with many lenders reducing their rates to attract borrowers. While there is still uncertainty in the market, the trend is expected to continue, with many experts predicting a base rate cut in August. For those seeking better deals, now may be the perfect time to explore their options.