A new mortgage price war has broken out in the run up to the Budget as high street lenders fight to win business from nervous buyers in a subdued housing market.
Both HCBC and TSB have cut their rates on fixed deals twice in a week following falls in the swap market used to price loans. Other lenders to have pushed through cuts include Halifax, Santander, NatWest, Barclays and Skipton Building Society.
Santander trimmed its fixed rates for homebuyers and people remortgaging by up to 0.36%, while NatWest shaved its deals by as much as 0.21% with its cheapest two year fix now at 3.77%.
That was in turn undercut by Barclays today which cut its best rate for two year fixes to 3.72% from tomorrow, although this is only availably to Premium banking customers with a deposit of at least 40%.
Gilt yields - the interest received by buyers of British Government bonds - have fallen sharply over recent weeks on hopes of another interest rate cut from the Bank of England before the end of the year. Today the yield on the benchmark 10 year gits stood at around 4.44%, down from close to 4.75% in mid September.
This has allowed lenders to borrow more cheaply in the wholesale money markets and pass that on to home buyers through cheaper deals.
Most commentators do not expect a move from the current 4% when the Bank’s Monetary Policy Committee (MPC) meets next week but Goldman Sachs analysts said this week they thought a vote to ease the cost of borrowing is possible.
Aaron Strutt of brokers Trinity Financial said: “Swaps have come down so the lenders can afford to make their rates a bit cheaper. There have not been many real rate changes from the bigger banks for quite some time so the announcements from Barclays, HSBC and Santander that they are making price cuts is good news.
They are lowering their mortgage rates as the lenders look to attract more borrowers in the run-up to Christmas. The current slowdown in the UK mortgage and property market is also making them work a bit harder, as many buyers wait to see what Labour announces in the November Budget. There is no doubt the Chancellor having a Budget so late in the year with so many rumours coming out about tax changes is delaying people from buying and selling.
More of the lenders are starting to lower their rates again now following changes from the major mortgage providers.
“TSB has announced its second round of rate cuts in a week which is pretty unusual. We are at the stage where the banks and building societies want more business but the property market is much slower which is undoubtebly linked to the uncertainty surrounding the Budget.
“NatWest has just lowered its rates and now has a two year fix at 3.77% and a five-year fix at 3.90% which isn’t bad. If the base rate comes down again in December, then rates may well get a bit cheaper.
“Nationwide must be about to reprice its rates too seeing as all of its main competitors have made rate improvements.”
