HalifaxDec 9 2022

Mortgage lenders cut rates by up to 1pp ahead of base hike

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Mortgage lenders cut rates by up to 1pp ahead of base hike
Chris Ratcliffe/Bloomberg News
ByRuby Hinchliffe

A handful of mainstream mortgage lenders have cut their rates today by as much as 1.00 percentage point ahead of the Bank of England's base rate hike next week.

The latest cuts by Halifax, Virgin Money and Nationwide follow a trend of rate reductions over the past month and a half, with sub-5 per cent rates first beginning to emerge back in mid-November.

After the Bank of England’s smaller-than-expected base rate hike at the beginning of last month, lenders began lowering their mortgage interest rates as confidence returned to the market and swap rates - a leading indicator for mortgage rates - began to settle.

Fixed rate deals are likely to continue on their current downwards trajectory.Sarah Coles, Hargreaves Lansdown

Halifax’s latest rate cuts, set to come into effect today (December 9), see it make cuts of up to 1.01 percentage points. It is now offering a five-year fixed rate of 4.5 per cent.

The cuts arrive as Virgin Money launches a new five-year fixed rate at 4.64 per cent.

While Virgin’s new deal is for borrowers with a 15 per cent deposit or more, Halifax’s 4.5 per cent rate requires borrowers to have saved up a 40 per cent deposit.

Average two-year fixed mortgage rates currently sit at 5.84 per cent, while average five-year fixed mortgage deals sit at 5.67 per cent, according to Moneyfacts.

Virgin’s changes, which also came into effect today, saw existing residential five and 10-year fixed rates reduced by up to 0.31 percentage points, while buy-to-let five-year fixed rates were cut by more than double this amount (0.71 per cent).

Meanwhile, Nationwide has reduced selected fixed rates for new and existing borrowers across its two, three and five-year products by up to 0.30 percentage points.

Harmony Financial Services director, Imran Hussain, said it was great to see more lenders follow Natwest, which cut its residential rates by up to 0.55 percentage points earlier this week.

"It's a positive step in the right direction for home movers, as well as first-time buyers, and those looking to remortgage," said Hussain.

"It's also great to see more competitiveness with regards to rates compared to a couple of months ago when all rates were heading north."

'Mortgage rates could fall further'

The cuts precursor another Bank of England rate rise next week, which is expected to be 0.5 percentage points, taking the base rate to 3.5 per cent.

Experts have said the next base rate rise, much like the last, is likely already priced in following the market chaos which ensued in October after former prime minister Liz Truss’ explosive ‘mini’ Budget.