26 June 2024 , 08:01
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HSBC has joined Barclays and NatWest in reducing mortgage rates off the back of hopes that the Bank of England will cut interest rates this summer.
The rate cuts from HSBC come into effect from today and apply across new mortgage deals, as well as product transfers and those who are remortgating. Barclays reduced rates on Tuesday, with some products cut by more than 0.25 percentage points, while NatWest announced cuts on Friday.
It comes after the Bank of England decided to pause its base rate at 5.25% for the seventh time in a row last week, despite inflation finally falling to its 2% target. Markets are now anticipating a summer rate cut when the Bank of England next meets on August 1.
Michelle Lawson, director at Lawson Financial, said: "Temperatures may be on the rise at last for the British summer, but rates are thankfully on their way down. This announcement from HSBC, following Barclays yesterday, is great news for the UK's beleaguered borrowers. More lenders are now sure to follow suit."
But average mortgage rates are still more expensive than what millions of people who fixed on a cheap rate before interest rates started rising are used to paying. The average rate on a two-year fixed deal stands at 5.96% according to Moneyfacts, while the average five-year fix is 5.53%. This year, about 1.6 million existing borrowers will see their cheap fixed-rate deals expire.
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If your mortgage is due to expire, you should compare rates now and speak to a mortgage broker to look at your options. Generally speaking, lenders let you secure a new deal three to six months in advance. If rates continue to come down, you may be able to cancel the deal you've agreed to and sign up to a cheaper rate - but check with your lender before signing up first to see if there are any fees.
New analysis from property website Rightmove suggests someone getting onto the property ladder now can expect to pay around £400 more per month for their mortgage than five years ago. Rightmove suggest the average first-time buyer mortgage payment has risen by 61% since the last General Election year of 2019, from £667 to £1,075 per month.
The calculations made various assumptions, including that first-time buyers would have a 20% deposit to put down, that their mortgage term would last 25 years and that they were taking out a five-year fixed-rate mortgage on an average rate. Rightmove also found first-time buyers now face paying £227,757 for a home, up by nearly a fifth (19%) since 2019, Rightmove said.