Mortgage Competition Heats Up Ahead of Rate Decision

With the Bank of England’s key interest rate decision looming on the horizon, mortgage lenders are ramping up competition, slashing rates on new fixed-rate mortgages in recent days. Brokers predict further cuts are on the way, but mortgage rates remain significantly higher than the low levels homeowners have grown accustomed to over the past decade.

The Bank of England’s decision on interest rates could have a significant impact on mortgage rates

Lenders’ funding costs have hinted at falling, and analysts believe the Bank may cut benchmark interest rates for the first time in four years, potentially as early as 1 August. This move could lead to a reduction in mortgage rates, providing some relief to homeowners.

Mortgage rates have soared in recent months

However, with about 1.6 million existing borrowers facing the expiration of their fixed-rate deals this year, many are bracing themselves for significantly higher repayments on their next home loan. The average rate on a two-year fixed deal currently stands at 5.92%, while the average five-year fixed rate is 5.5%, according to Moneyfacts.

Moneyfacts provides data on mortgage rates

Major banks, including Barclays, Nationwide, Virgin, Coventry, and Skipton, have cut rates in recent weeks, and experts expect more to follow suit. Aaron Strutt from mortgage broker Trinity Financial notes that there is ‘more positive news’ coming from lenders, suggesting that borrowers who have recently agreed to a new deal may still have time to renegotiate a better rate.

Trinity Financial provides mortgage brokering services

While some predict sub-4% deals could return to the market soon, others are more cautious. Amidst the uncertainty, borrowers are advised to take steps to make their mortgage more affordable, such as making overpayments, moving to an interest-only mortgage, or extending the life of their mortgage.

Tips for making your mortgage more affordable

As the mortgage market continues to evolve, one thing is clear: borrowers must stay vigilant and be prepared to adapt to changing circumstances. With lenders competing fiercely for business, now may be the perfect time to explore your options and secure a better deal.

Mortgage lenders are competing fiercely for business