In a surprising turn of events, mortgage interest rates continue their descent despite the City’s ongoing speculation about an impending series of Bank of England interest rate hikes. The most recent contributor to this trend is Halifax, a prominent player in the mortgage market, which has taken a step towards further reducing its rates.
As indicated by Moneyfacts, the average two-year fixed residential mortgage rate stands at 6.77% today, a slight drop from yesterday’s 6.79%. Similarly, the average five-year fixed residential mortgage rate is now at 6.26%, down from its previous mark of 6.28%.
The potential for a further decline in these rates gains traction with Halifax’s latest move to cut its rates. Effective from the 21st of August, the country’s largest mortgage lender is introducing lower prices for its five-year fixed-rate offerings. This decision follows a similar action taken by Halifax just over a week ago.
Clive Read, proprietor of brokerage firm Goldmanread, suggests that other major lenders may follow suit with rate reductions. He points out that Halifax’s capacity and market presence grant them the ability to lower rates while maintaining profitability. Read believes that the notable market influence of Halifax, being a part of the UK’s largest banking group, compels them to demonstrate support for UK homeowners and consumers. He anticipates that this initiative may prompt other significant players in the sector to follow, though he does not foresee substantial adjustments from smaller entities.
Jamie Lennox, director at Dimora Mortgages, proposes a potential reason behind the recurrent rate reductions – lenders could be striving to recover lost ground after rapid rate increases experienced in May, June, and July. Lennox expresses optimism about the renewed rate cut from the UK’s largest mortgage lender. He perceives it as a positive stimulus for the mortgage and property market, especially given the current market sentiment anticipating further base rate increments due to persistent core inflation. Lennox speculates that the swift rate escalation might have led to a decline in new applications, and lenders could now be aiming to make up for their annual targets.
Despite this downward trajectory in mortgage rates, the broader financial landscape forecasts a different scenario. The Bank of England’s anticipated interest rate hikes are now projected to occur at least three more times. Just a week ago, the market’s projection for the Bank of England’s peak interest rate was 5.75%. However, robust wage growth and stubborn core inflation have led traders to reconsider, placing the odds nearly evenly between a peak rate of 6% or 6.25%.
It’s worth noting that mortgage rates are intricately tied to the anticipated Bank Rate. This link exists due to lenders’ ability to mitigate risk through interest rate swaps. As the financial landscape evolves, all eyes are on how this delicate interplay between mortgage rates and broader market trends will shape the financial future for both homeowners and investors alike.