Three major high street lenders, Barclays, HSBC, and TSB, have announced reductions in mortgage rates on more than 100 deals, offering welcome relief to borrowers who have faced rising rates in recent weeks.

Barclays will implement significant cuts on Friday, reducing fixed rates on purchase and remortgage deals by up to 0.45 percentage points. Notably, the rate on one of its five-year fixed deals will drop from 4.77% to 4.32% for borrowers remortgaging with a 40% deposit.

HSBC, have announced plans to lower interest rates on over 100 of its fixed deals spanning two, five, and ten years, targeting both homeowners and landlords.

With TSB also announcing reductions on some of its two and five-year deals, cutting rates by up to 0.1 percentage points.

Brokers anticipate that these rate cuts will prompt other lenders to follow suit. Hina Bhudia of Knight Frank Finance commented, “HSBC already had many of the cheapest deals on the high street, so this is quite a statement of intent. We’ll have to wait and see, but I’d be surprised if we don’t see more lenders cut rates in response.”

These reductions come after a period of increasing mortgage rates, driven by delayed expectations of an interest rate cut by the Bank of England due to persistent inflation and rising swap rates, which banks use to price fixed loans.

Last week, the Bank of England maintained borrowing costs at a 16-year high of 5.25% but indicated that a rate cut could occur as soon as next month if inflation continues to decrease. This, combined with a recent fall in swap rates — with two-year swaps dropping from 4.57% to 4.46% and five-year swaps from 4.02% to 3.9% — has buoyed lenders.

Mark Harris of the mortgage broker SPF Private Clients said, “This flurry of rate reductions from some of the major lenders is great news for borrowers. Lenders tend to follow the herd when it comes to mortgage pricing, so these cuts should give others the confidence to reduce their own rates, boosting market activity and confidence.”

Currently, the average two-year fixed rate is 5.92% and the average five-year deal stands at 5.49%, according to analyst Moneyfacts. These averages include deals for borrowers with adverse credit ratings and small deposits, which typically have higher rates.

Approximately 800,000 households are expected to transition from a fixed-rate deal to a higher rate between now and November, according to analysis by the Liberal Democrats and the House of Commons library. Nicholas Mendes of the broker John Charcol highlighted the “significant potential” for further rate reductions in the next two weeks.

He added, “Financial markets have adjusted their forecasts, signalling a potential end to the recent trend of lenders increasing their rates. For those who have recently applied for a mortgage, you may have the opportunity to switch to a lower rate given the change in market conditions, which could result in substantial savings over the term of your mortgage.”

This series of rate cuts by major lenders provides a much-needed respite for homeowners and is expected to stimulate market activity and confidence in the coming weeks.

Read more:
Relief for Homeowners as Major Lenders Reduce Mortgage Rates