Lenders cut mortgage rates following stiff competition

Wednesday 23rd January 2019 01:59 EST

A report from the Royal Institution of Chartered Surveyors (Rics) has some good news for first-time buyers and homeowners remortgaging their properties. It said the looming threat of Brexit had dragged down the UK property market further, with prices falling at the fastest rate in six years. Last week HSBC dropped rates on 31 different mortgages while the market-leading product for a 10-year fixed-rate loan also went down. The cuts come at a time when the outlook for property sales is at the lowest level for two decades. HSBC said it was reducing fixed and tracker rates. A two-year fixed rate for a loan 95 per cent of the value of the home was cut by 0.1 per cent to 2.99 per cent.

A five-year fixed rate was also down 0.1 per cent to 2.29 per cent on a home with 90 per cent loan to value. Both of these moves will help first-time buyers. Meanwhile, Coventry building society dropped the interest rate on its 10-year fixed mortgage, one of the most competitive, from 2.35 per cent to 2.25 per cent. This however, only applies where there is a 50 per cent loan to value, so may have a limited number of customers. Darren Cook of the financial data provider Moneyfacts, said, “We are aware from published mortgage approval numbers that there is a limited amount of mortgage business that banks and building societies are able to compete for, so it is likely that recent rate activity in the fixed-rate sector demonstrates that competition for business is indeed rife.”

He also said, “Our research shows that mortgage providers have generally left their ranges unchanged during the second half of December, but it seems that some providers have been quick out of the stalls early in January to make sure that they take a competitive advantage into the new year.” Chris Sykes, mortgage consultant at Private Finance, believes there is a suggestion that some banks missed their targets last year and want to “come out strong in 2019”.

He said, “Coventry was not alone in reducing rates to kick-start 2019. So far January has seen falling rates from HSBC, Furness building society and Accord Mortgages, with the latter making significant cuts in some cases, as well as increasing cashback amounts and decreasing fees on selected products. Virgin Money and Barclays have followed suit, reducing some fees and rates.” Adding, “However, some specialist lenders like Paragon have decided to follow an opposite trend, with increased rates and decreased cashback amounts. Buy-to-let lender the Mortgage Works is also looking to increase rates.” Sykes said it is difficult to see further drops in the near future as the margins that banks are operating on are tight.

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