Major lenders signal easing pressure on mortgage rates

Signs of renewed competition are emerging in the mortgage market as several major lenders announce cuts to fixed-rate products amid improving market sentiment and falling swap rates.

Santander has become the latest high-street bank to confirm reductions, following similar moves by Barclays and HSBC.

Barclays is set to improve its fixed-rate range for purchases from Friday, while HSBC will lower rates from tomorrow. Santander will follow on Monday, cutting some three-year fixed deals by up to 0.36%.

The adjustments come as the outlook for inflation brightens. September’s rate held steady and undershot expectations, prompting speculation that the Bank of England could bring forward a base rate cut before the end of the year.

FALLING SWAP RATES

Falling swap rates – the key measure used by lenders to price fixed-rate mortgages – have provided room for reductions, with analysts suggesting that if the trend continues, further repricing could follow across the sector.

David Hollingworth (main picture, inset), associate director at L&C Mortgages, said: “There are early positive signs for mortgage rates after the rate of inflation for September held steady, undershooting expectation.

“Hopes that inflation may have peaked at a lower level than expected has opened the door to a reduction in the Bank of England base rate before the end of the year.

“As market forecasting has improved, swap rates have fallen further which should give lenders the chance to improve their fixed rates.”

OTHERS WILL FOLLOW

And he added: “We know that once there are moves from some of the big players, it will inevitably lead to others following suit. If the more positive outlook in the markets holds firm, we could see another series of repricing moves that will cut fixed rate pricing.

“However, with the Budget to come it’s hard to predict where sentiment could head from here.

“That’s already brought some borrower anxiety into play and so there’s still a strong case for taking a rate now and keeping a close eye on market movement from here. That will give security but still allow a jump to a lower rate before completion if we see further improvements.”