Big banks drop rates and likely to trigger copycat cuts

HSBC has made extensive cuts to rates levied on a vast range of residential and buy to let mortgages, coming into effect today.

The bank’s changes are just the latest announced in a fast-moving landscape, responding to reduced Swap rates.

Nicholas Mendes, mortgage technical manager and head of marketing at John Charcol, says: “We can anticipate that lenders will escalate their strategies significantly over the next few weeks.

“On Friday, the five-year money rate was at 3.82%, indicating that lenders certainly have room to lower five-year fixed rates even further from their current levels.
“Interestingly, last week saw swaps holding steady at 5.2% since May 7 – the longest stable period since the benchmark’s inception in 1997.

“This stability has enabled lenders to avoid continuous repricing and focus on enhancing their service levels in preparation for the next repricing battle, reminiscent of earlier this year.

“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.”

Barclays is also slashing its rates on a number of deals, and the changes have already been implemented. 

These include Two-year fixed deal with 90% LTV and no product fee at 5.48% from 5.76%; Two-year fixed deal with 60% LTV and no product fee at 4.88% from 5.13%; and Five-year fixed deal with 90% and a £999 product fee at 4.85& from 4.90%.

Barclays’ are expected to trigger other lenders, with Riz Malik at R3 Mortgages forecasting: "Barclays is the first lender of the week to improve selected mortgage products but my suspicion is that it won't be the last."

Michelle Lawson, director at Lawson Financial, speaking via Newspage, comments: “What a refreshing email to receive from Barclays on a scorchio summer day. These are real reductions in rates, which will have significant benefits for borrowers and are not just a token gesture.”

And Simon Bridgland at Release Freedom thinks these "sizzling hot" deals will be the start of things to come: "Things look set to heat up not just in our skies but in mortgage rates, too. Expect more lower fixed rates to continue to appear in the days ahead.”

An early follower was MPowered which reduced its entire range of two year fixed rates, which now start at 4.76%, down from 4.87%, at 60% loan-to-value with a £999 arrangement fee. For those not wanting to pay an arrangement fee, rates start from 4.99%, down from 5.09%, on a 60% LTV. 

For remortgagers, two-year fixed loan  rates start on the no arrangement fee options from 5.12% , down from 5.24%, on a 60% LTV, rising to 5.23%, down from 5.36%, for those on a 70% LTV. 
  
MPowered’s five year fixed rates have also been lowered for rates 75% LTV and lower for both purchase and remortgage. Those seeking a five year fixed loan are offered rates starting at 4.47%, down from 4.53%, at 65% LTV with a £999 arrangement fee.