Major Lenders Reduce Mortgage Interest Rates – A Detailed Analysis

UK Mortgage Rates Start to Fall Following Bank of England Decision

The Bank of England’s decision yesterday to hold interest rates steady at 3.5% has already prompted some major lenders to cut their mortgage rates. This is welcome news for homeowners and buyers who have seen rates rise sharply over the past year. In this post, I’ll summarise some of the new mortgage deals that have just been launched.

HSBC Leads With Rate Cuts

HSBC were quick off the mark to cut rates following the Bank’s decision, no doubt aiming to garner some positive headlines. They have launched a new 5-year fixed rate mortgage at 4.84% for borrowers with a 40% deposit or equity. The arrangement fee is £999.

While a 40% deposit may seem high to some, for remortgagers who have built up equity this could be an attractive option. The rate is far lower than many of HSBC’s other 5-year deals aimed at small deposit buyers.

HSBC have also unveiled a new 2-year fixed buy-to-let mortgage at 5.02% for landlords with a 40% deposit or equity. The fee is higher at £1,999 but this could still be a cost effective option for investors seeking a short term deal.

Santander Follow Suit

Not to be outdone, Santander have also introduced a new 5-year fixed rate deal at 60% loan-to-value. Their rate of 4.64% narrowly beats HSBC’s, making it one of the most competitive mainstream 5-year fixes currently on the market. The arrangement fee is a reasonable £999.

## Barclays Offer Short Term Option

Barclays new 2-year fixed rate at 5.1% is aimed at borrowers with 40% equity. The lower fee of £599 makes this an attractive choice for those who want more flexibility or expect to remortgage again soon. While the rate is a little higher than some 5-year deals, the reduced early repayment charges could offset this for some.

Options For First Time Buyers

Halifax have launched a new 95% mortgage aimed at first time buyers, with only a 5% deposit required. The rate of 6.57% is much higher than for remortgagers, reflecting the greater risk involved. But the £1,495 fee is very reasonable. This deal could be a lifeline for new buyers who are struggling to raise a substantial deposit while house prices remain high.

West Brom Building Society Also Cut Rates

Not to be left out, smaller lenders are also reducing rates. West Brom building society has introduced a new 5-year fixed mortgage at 4.66% for borrowers at 60% loan-to-value. The £899 fee makes this competitive, and it includes the ability to make overpayments up to 10% of the balance each year.

Specialist BTL Deal For Landlords In Difficulty

A final deal worth highlighting is from specialist buy-to-let lender Landbay. Their new 2-year fixed rate at 4.89% is targeted at landlords who have seen their payments shoot up at renewal.

With 75% LTV, this could be an option for overstretched landlords who need some breathing space. The higher 6% arrangement fee reflects the increased risk. But for landlords facing repossession this temporary lifeline could make the difference while they consider changes such as converting to an HMO rental property.

Outlook Going Forward

While these new mortgage rates remain considerably higher than a year ago, it’s encouraging to see lenders competing again on price. If this continues, sub-4% rates could return in the not too distant future.

However, with the economy remaining weak and the risk of further interest rate rises, borrowers should still be cautious and seek professional advice. Locking in a fixed rate provides security even if variable rates fall. And make sure to carefully compare the entire package of rate, fee, features and exit penalties when choosing a new mortgage deal.

But for now, the cuts by HSBC, Santander and others provide some brighter news for both existing and new mortgage borrowers. I’ll be sure to provide further updates here if we see more lenders reducing their rates in the coming weeks.