Mortgage lenders have started the year by slashing rates, lessening some of the burden on the new deals for homeowners. The UK’s largest lender, Halifax, has cut interest on some products by almost one percentage point, with others expected to follow soon. In what is being described as a “fast-moving market,” HSBC has already announced that it will be slashing rates. However, experts are warning homeowners to scrutinize the offers to get the best deal.
According to Trinity Financial’s Aaron Strutt, when lenders make substantial rate cuts, they do not usually slash the interest on all products equally. As such, borrowers are being urged to study each deal carefully to ensure they get the best possible rate. Over the past two years, significant changes have impacted mortgage rates, which, although still quite high, have become more affordable. After fixed-rate deals expire, borrowers who do not take any action are automatically moved to the more expensive variable rate.
Over the next 12 months, approximately 1.6 million borrowers’ fixed-rate deals will expire, meaning a vast majority could experience a substantial increase in their monthly repayments. Nonetheless, increased competition between lenders could mean that the financial pain may not be as severe as initially feared. Halifax, for instance, recently lowered its rates by up to 0.83%, while HSBC’s two-year fixed rate for remortgages will be below 4.5% for the first time since June 2020.
According to David Hollingworth, L&C Mortgages’ associate director, these rate cuts are the latest salvo in a fast-moving market. These new lower rates will at least take some of the sting out of the inevitable rise, Hollingworth added. Still, despite economists’ expectations of a rate cut from the Bank of England, the average rate on a two-year fixed mortgage has only marginally dropped to 5.93%
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