Multiple lenders including HSBC, Santander, The Co-Operative Bank and Virgin Money have cut rates in recent days, and brokers say more are expected to follow, with NatWest due to reduce prices on Tuesday.
Brokers generally expect that rate falls to continue, saying lenders are “sharpening their pencils” ahead of a “fight” for market share.
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And lenders have started to drop their prices as result, raising the prospect that others could follow with more deals below 4 per cent, in a fight for customers.
Jane King, mortgage adviser at Ash Ridge, said: “There is a bit of competition going on. We are definitely seeing some significant reductions in fixed rates right now and the start of new sub-4 per cent rates are a very good sign.”
Lewis Shaw of Shaw Financial Services added: “It’s not quite a rate war – yet – but with the major lenders now sharpening their pencils, we may be on the cusp of a real fight for market share. Despite ongoing global volatility, swap rates have held firm, and a base rate cut in May looks increasingly like a done deal.”
“Mortgage borrowers may be in line for more unexpected rate cuts following Donald Trump’s tariff interventions. The cost of funding mortgages has dropped, meaning lower fixed rates may be coming.”
But the background to the rates falling is generally less positive. Reduction expectations are partly being fuelled by predictions that the economy could stagnate this year, which is generally bad news for people’s pay and the jobs market.
Part of the reason interest rates are expected to fall is because the Bank of England is likely to be concerned that taxes placed on imports to the US by President Trump – and China’s retaliation – could have a negative effect on the global economy, which could affect the job market.
Shaw also warned that rate cuts, coupled with some mortgage lenders easing their affordability rules to allow people to borrow more money could see property prices increase.
However, some experts have warned that the volatile global situation means drops in rates are not certain.
“Lenders are trying to strike a balance: some are reacting quickly to market shifts, and we’re seeing more borrowers switching deals mid process to lock in better offers. That’s increasing pipeline risk, and lenders will be approaching the situation carefully to avoid service level pressures.”
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