he UK’s biggest mortgage lender Halifax has become the latest to cut its mortgage rates, in yet another sign that prices are declining again after rising to 15-year highs.
Halifax will bring in new lower rates from Friday, following a wave of other lenders including HSBC, TSB and Nationwide lowering rates earlier this week. For HSBC, the price cut had been the second in just two weeks.
The decline in mortgage rates comes as the Bank of England raised its base rate to 5.25%. While the Bank Rate has a large influence on mortgage rates, banks usually set the price of a fixed-rate mortgage based on City expectations of the rate over the length of the fix, rather than setting it based on the rate at a given moment, and trade financial instruments based on those expected future rates to hedge against the risk that they are wrong.
This means that mortgage rates falling even as the Bank Rate rises is not necessarily unusual if rates had previously been expected to rise to exceptionally high levels.
Rob Gill, managing director at mortgage broker Altura Mortgage Finance, said expected interest rates could fall further – driving mortgage rates down further – if July inflation comes in lower than expected.
“All eyes will now be on next week’s inflation figure, due on August 16th,” Gill said. “If this confirms a further fall in inflation, a mortgage price war in September cannot be ruled out as lenders seek to make up for a quiet July and August.”
Lewis Shaw, founder of Mansfield-based Shaw Financial Services, also hoped to see a ‘price war’: “After the rate reductions by HSBC and TSB, Halifax now wants in on the action, which can only be positive.
“It’s a welcome relief to see rate reductions, and this could be the start of a price war as transaction volumes drop and mortgage lenders need to get the sharp elbows out to hit their targets.”
Riz Malik, director of independent mortgage broker, R3 Mortgages, said: “With the Halifax, the UK’s largest residential lender, adjusting its prices downwards alongside HSBC and TSB, it signals to the market that even following a base rate increase, fixed rates can drop.
“In that regard, the mortgage market has become almost surreal.”