UK mortgage landscape strengthens as Halifax and HSBC announce cuts

November 17, 2023

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Article Summary

Buy-to-let
  • Halifax, First Direct, and HSBC have all joined the wave of rate cuts, now presenting a variety of options below the 5 percent mark.

  • Halifax, has declared rate reductions, trimming mortgage rates by up to 0.46 percent. Notably, a five-year fix for borrowers with a 10 percent deposit has been reduced by 0.24 percent, bringing it down to 4.97 percent.

  • HSBC UK is anticipated to follow suit with widespread reductions in its mortgage rates, though specific details have yet to be disclosed.

Introduction

In a promising turn of events for property investors, major UK lenders are making significant strides in widening mortgage choices, offering new deals with reduced rates. Halifax, First Direct, and HSBC have all joined the wave of rate cuts, now presenting a variety of options below the 5 percent mark. This comes at a time when house prices are gradually on the decline, hinting at a potential cooldown in the property market. The recent pause in the Bank of England base rate, following 14 consecutive increases, has led experts to suggest that ‘peak rates are behind us,’ offering a more favourable environment for prospective property investors.

 

Who are making cuts?

First Direct has taken a bold step, announcing substantial rate cuts of up to 0.40 percent. These reductions, the most significant since February of this year, are poised to enhance the competitive landscape. Halifax, a prominent lending giant, has also declared rate reductions, trimming mortgage rates by up to 0.46 percent. Notably, a five-year fix for borrowers with a 10 percent deposit has been reduced by 0.24 percent, bringing it down to 4.97 percent. For those with a 40 percent deposit, the five-year fix is now 4.53 percent, a reduction of 0.20 percent. Both Halifax deals come with a £999 fee.

HSBC UK is anticipated to follow suit with widespread reductions in its mortgage rates, though specific details have yet to be disclosed. The collective effort by these major lenders signals a positive trend for property investors, offering a broader spectrum of choices and potentially reducing the overall cost of borrowing.

First Direct is now presenting rates as low as 4.74 percent for new and existing customers seeking a five-year fixed-rate deal with a 40 percent deposit. In a move aimed at fostering accessibility, the bank has introduced two new mortgages tailored for borrowers with a 5 percent deposit. Liam O’Hara, head of mortgages at First Direct, highlighted the competitive options for existing customers, stating, “Our switcher rates have also been significantly reduced to ensure existing customers have competitive options when looking to re-mortgage.”

He further emphasized the commitment to increasing product availability for those looking to enter the property market with a smaller deposit. This strategy involves launching new products in the 95% LTV (loan-to-value) space, reflecting a forward-looking approach to address the needs of a diverse range of investors.

According to Moneyfacts

According to data from financial information website Moneyfacts, the average two-year fixed homeowner mortgage rate across all deposit sizes was 6.21 percent on Tuesday morning. This was slightly down from 6.22 percent on Monday, indicating a subtle downward trend. Similarly, the average five-year fixed homeowner mortgage rate stood at 5.80 percent on Tuesday, a slight decrease from 5.81 percent on Monday. This trend reflects the broader landscape of reduced mortgage rates offered by several prominent lenders.

Numerous lenders, including Nationwide Building Society and Virgin Money, have also joined the trend of mortgage rate cuts. James Hyde of moneyfactscompare.co.uk noted that these rate cuts from First Direct are emblematic of the recent drops in mortgage rates offered by prominent lenders. He emphasized that there have been five-year fixed products available at sub-5% for a while now, with the lowest rates now comfortably below that threshold.

Simon Gammon, managing partner at Knight Frank Finance, expressed optimism about the current scenario, stating, “It’s now looking increasingly positive that peak mortgage rates are behind us, and we are moving into a period in which mortgage rates are higher than people are used to but are ultimately more manageable.” This positive outlook may inject momentum into the market and prompt other lenders to sharpen their pencils or risk losing out in an increasingly competitive landscape.

Conclusion

In conclusion, the recent announcements by major UK lenders to reduce mortgage rates signal a positive shift for property investors. The combination of declining house prices and a more stable interest rate environment creates a favourable backdrop for potential homeowners and investors alike. As lenders compete to offer more attractive rates, property investors may find increased affordability and enhanced opportunities in the evolving landscape of the UK property market.

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