UK Lenders Rate Cuts Amidst Competition and Favourable Inflation Data

by | Thursday 10th Aug 2023 | Mortgage News

In a move that clearly highlights the increasing competition within the UK’s mortgage market, four major lenders have announced more mortgage rate cuts, the second time in just three weeks. The decision to reduce rates comes after better than anticipated inflation data, potentially suggesting a stronger effort to attract borrowers and stimulate demand in a turbulent market.

UK Mortgage Lender Rate Cuts

Nationwide, the second largest mortgage lender in the UK, made a significant announcement on Wednesday by slashing prices on select fixed rate products by up to 0.55%. HSBC, ranking as the sixth largest mortgage provider, joined the trend by cutting costs by as much as 0.20%. TSB also lowered rates by up to 0.40%. These rate reductions were also followed by Halifax, who announced its plans to reduce prices on fixed rate mortgages by an impressive 0.71% starting this Friday (11th August 2023).

Understandably these rate reductions from some of the biggest UK mortgage lenders have ignited optimism among borrowers that mortgage rates increase might be finally slowing down and we could see rates dropping more frequently. However, while the recent downward trend is encouraging, borrowers are still grappling with near record costs for their mortgages and properties.

Average UK Mortgage Rates

According to recent data, the cost of a two year fixed mortgage has dropped very slightly from its peak of 15 years at the beginning of August 2023. Nevertheless, it remains higher than most people have been used to over the last few years, currently at around 6.83%. To put this into perspective, the rate is significantly higher compared to 3.99% recorded only a year ago and even surpasses the peak observed in October last year following the disastrous “mini” budget announced by Chancellor Kwasi Kwarteng.

As mentioned previously, this trend of falling mortgage rates is entering its third consecutive week, fuelled by last month’s announcement that UK inflation had sunk to a 15 month low in June 2023. This downward projection comes as a nice relief after the sharp increase we saw earlier in the year, which had been fuelled by concerns surrounding sustained price pressures. Interestingly, the decline in mortgage rates has continued, despite the Bank of England’s decision to elevate interest rates to a 15 year high of 5.25% just last week.

Aside from the influence of the Bank of England’s policy adjustments, lenders have been compelled to release rate cuts as part of their strategy to compete in a market that has slowed down over the last year or so. As borrowers adjust their financial strategies in response to the challenging economic crisis, lenders are seemingly making efforts to entice potential homebuyers with more attractive and affordable mortgage options and products.

Speak To a Mortgage Broker to Make the Most of Rate Reductions

The recent wave of mortgage rate reductions by some of the UK’s largest lenders reflects a combination of factors, including keen competition in the market and a more optimistic inflation outlook. While these rate cuts bring a bit of hope for borrowers, it is still so important for borrowers and potential borrowers to get in touch with a mortgage professional. Navigating a tough mortgage market is something that no one should have to do on their own. Call or email our team at Oportfolio mortgages today to see how our advisors can help you. 

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