London (Parliament News) – HSBC and Barclays are slashing rates on their fixed mortgage contracts in what some brokers claim could be the beginning of a “summer of savings” for homebuyers and those looking to remortgage.
What prompted HSBC and Barclays to reduce mortgage rates?
Barclays has lowered rates by more than 0.25 percentage points in some points from Tuesday, and its amounts led to a quick response from HSBC, which stated it would be cutting rates across its home loans range with effect from Wednesday.
While the latest home loan rates have been largely stable over the last month or two, the pricing of some sales has crept up. However, recent advances to money market swap rates – which largely define the pricing of new fixed deals – appear to have provoked two of the biggest mortgage lenders to reduce their rates, with others predicted to follow suit.
How have recent economic factors influenced mortgage rates?
Mortgage prices have endured a rollercoaster ride over the last two years. The fallout from Liz Truss’s September 2022 mini-budget assisted push the prices of many new fixed-rate contracts to above 6%. Then, at the beginning of this year, they dropped snappily, only to later start creeping back up.
Barclays has revealed a series of reductions that mean, for instance, that a two-year fixed rate for those with a 10%-plus guarantee or equity stake that was priced at 5.76% is now being presented at a rate of 5.48%. Another two-year fixed contract that was priced at 5.13% is now on sale at 4.88%. HSBC’s stakes are across its range, though at the time of the report, there were no details of the new rates.
Will other lenders follow HSBC and Barclays’ rate cuts?
Another lender, MPowered Mortgages, has this week shrunk rates across its specified deals range by up to 0.15 percentage points. Ranald Mitchell, a manager at broker firm Charwin Private Clients, stated HSBC had started a “summer of savings” for mortgage borrowers with its rate dents, following Barclays’ lead. He added: “As other lenders join the trend, homeowners may finally see the relief they have been seeking, though a broader market shift is still needed to truly spark the housing market.”
Andrew Montlake, the managing director of broker firm Coreco, stated that given inflation dropped in May to the Bank of England’s 2% mark and the easing of swap rates, these cuts could release “the starting pistol” on a continued bout of rate competition among lenders.
The Bank kept interest rates at 5.25% for the seventh straight time at its latest policy meeting last week, but conveyed the decision as “finely balanced”. That provoked some economists to say the Bank may be readying the way for a first cut in interest rates at its next session in August.
Nicholas Mendes​, a mortgage technical manager at the broker John Charcol, stated: “Given that most recent lender repricing has involved increases, there is now potential for reductions. We’ve seen some movement, but this latest reprice from HSBC is certainly going to spur on the market.”
Moneyfacts, the financial data provider, stated that the average price on a new fixed-rate deal lasting for two years was 5.96%, while the standard rate on a new five-year payoff was 5.53%. Both of these averages have remained steady over the past few days.