HSBC and Barclays cut their mortgage rates: Are things changing?

In a reversal of recent trends, two leading UK mortgage lenders have just unfurled the banner of rate reductions. After enduring a relentless climb in home loan expenses over the past three and a half months, the market is finally catching a break.

Starting on the 17th May, HSBC and Barclays are taking the helm, trimming rates across a spectrum of fixed mortgage offerings tailored for both prospective buyers and those looking to refinance.

Since the dawn of February, the trajectory of average mortgage rates has been on a steadfast upward march, punctuated by multiple increases from most mainstream lenders. However, murmurs within the mortgage brokerage sphere suggest that these latest developments may herald a pivotal shift in course.

Since February, we’ve witnessed a seismic shift in mortgage rates. The once-affordable five-year fixes have gracefully danced from below 4%to nearly 4.5%, while their two-year counterparts have mirrored this ascent, rising from approximately 4.2% to a hefty 4.8%.

While the specifics of HSBC’s mortgage rate adjustments remain shrouded in secrecy until tomorrow, Barclays has graciously unveiled its intentions to introduce some of the market’s most tantalising five-year fixes. Among these offerings is a gem: their lowest five-year fix for remortgagers, descending from a towering 4.77%to a more palatable 4.3%, adorned with a £999 fee. Unless HSBC manages to outdo this feat, which would undoubtedly set a new standard for best buys,.

This tantalising rate will be up for grabs for those remortgaging, provided their mortgage balance doesn’t exceed 60% of the property’s value. Consider, for instance, someone remortgaging a £200,000 loan over 20 years; their monthly installment could dwindle to a modest £1,246.

To place this in perspective, the average five-year fix currently hovers around 5.49%, according to Moneyfacts, which would necessitate a monthly outlay of £1,375 for the same mortgage terms.

But Barclays isn’t stopping there. They’re also extending their generosity to those with a loan-to-value ratio of at least 75%, offering a rate reduction from 4.84%to a more inviting 4.45%, another top contender in the best buy race.

Moreover, prospective home buyers with a robust 40% deposit can now rejoice as Barclays slashes its lowest mortgages rates from 4.47% to a commendable 4.34%, coupled with an £899 fee.

For those with a 25% deposit, Barclays has something in store as well, offering a rate reduction from 4.73% to an enticing 4.44%.

Meanwhile, HSBC remains tight-lipped about their upcoming rates, but tantalising whispers suggest a sweeping array of adjustments across various fixed products, catering to the needs of first-time buyers, home movers, and seasoned remortgagers alike.

These developments have sparked speculation among mortgage brokers, hinting at a potential paradigm shift in mortgage rate dynamics, with other lenders poised to follow suit.

Stephen Perkins, the astute managing director at Yellow Brick Mortgages, jubilantly exclaimed to the esteemed news agency, Newspage:

Michelle Lawson, the director at Lawson Financial, echoed the sentiments, stating:

Will mortgage rates start to fall?

For mortgage borrowers, the crystal ball revealing what’s next in the financial realm is none other than Sonia swap rates.

Mortgage lenders, the savvy navigators of the financial seas, often engage in interest rate ‘swap’ agreements to shield themselves from the tempestuous winds of fixed-rate mortgage lending. These agreements, reflected in swap rates, offer a glimpse into lenders’ predictions regarding the future trajectory of interest rates, thereby dictating the pricing strategies they employ for mortgage products.

As of May 1st, the five-year swaps were anchored at a sturdy 4.18% , while the two-year swaps stood firm at 4.68% . However, a shift in the winds has occurred since the month’s inception. By May 14th, the five-year swaps had eased to a more modest 3.97% , with the two-year swaps trailing closely at 4.49% .

While this downward trend suggests the potential for mortgage rates to follow suit, the descent may not be precipitous. Swap rates, though dipping, still maintain a loftier altitude compared to their positions at the year’s onset, when the two-year swaps lingered at 4.04% and the five-year swaps at 3.4% .

The prospect of rate cuts may be further fuelled if the base rate embarks on a downward journey, triggering favourable signals across the industry and potentially coaxing swaps to mirror this descent.

However, caution is warranted. The anticipation of lower rates has already been factored into current pricing structures, tempering expectations for immediate and substantial reductions in fixed-rate products.

Nicholas Mendes, the sage mortgage technical manager at John Charcol, observed: