High street mortgage lenders cut rates as ‘price war’ commences

High street mortgage lenders cut rates as ‘price war’ commences
  Virgin Money has launched a five-year fixed mortgage with a 4.28% interest rate

High street mortgage lenders Halifax, Nationwide and Virgin Money have all signalled cuts to their interest rates this week as broker predictions of a “price war” bear fruit.

As of today (January 20), Virgin Money has reduced residential fixed rates by up to 0.73 percentage points, and introduced a new range of exclusive purchase deals with lower rates, as well as cashback and free valuation incentives.

The new range includes a five-year fix with a 4.28 per cent interest rate, lower than many other high street lenders on the market.

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Nationwide has also cut selected fixed and tracker rates by up to 0.20 percentage points today.

New rates include a 4.69 per cent two-year fix, a 4.34 per cent five-year fix, and a 3.79 per cent two year tracker rate.

Looking ahead, Halifax has pointed to a sweep of cuts across its fixed rate product ranges from the beginning of next week (January 23).

Similar to Nationwide, they are largely cuts of 0.20 percentage points, helping first-time buyers, those looking to secure new builds, and those considering affordable housing, shared equity and green mortgages.

On its latest product guide, Halifax has a two-year fix at 4.70 per cent, a five-year at 4.40 per cent, and a two-year tracker at 4.09 per cent.

Earlier this month, managing director at Altura Mortgage Finance, Rob Gill, said dips in mortgage lending activity could be what pushes lenders to reduce their interest rates further.

According to the latest Money and Credit report, in November last year mortgage approvals for house purchases dipped to their lowest level since June 2020.

“Despite bond yields and other money market rates having dropped below pre-’mini’ Budget levels, mortgage rates remain stubbornly higher,” Gill said at the beginning of this month.

“However, we expect this gap to close as lenders compete for business in the new calendar year, in what looks to be a more challenging environment than 2022. 

“A slow start to the year could even see a mortgage price war break out as lenders compete for business.”

Fellow broker Lewis Shaw, director of Riverside Mortgages, said two of the biggest lenders - Nationwide and Halifax - dropping rates this week was “a pretty sure fire of knowing they fancy a bit of a price war”.

Director of Harmony Financial Services, Imran Hussain, said more of the market will likely fall in line with these cuts, but that rates will settle “at some point”.

“It is great to see that many major lenders are starting to reduce rates, which should be seen as a positive sign that the majority of the market will follow suit.

“But we will get to a point where rates start to stabilise, all subject to the Bank of England’s base rate decision in the coming few weeks.”

Next month, the Bank of England is expected to raise the base rate.