Falling Mortgage Rates: Lenders Compete and Housing Market Revives

A Shift in the Lending Landscape

Across the UK, major banks and niche lenders are increasingly focused on attracting customers, as falling mortgage rates continue to drive the market. After a challenging year in 2023 characterised by high borrowing costs, the market is now experiencing a positive shift. The recent reduction in the Bank of England’s base rate has sparked a competitive atmosphere among lenders.

In early August, the Bank of England lowered its base rate from 5.25% to 5%, following a decrease in inflation to more manageable levels throughout the year. Despite a slight uptick in July’s inflation to 2.2% – up from the Bank’s 2% target – the figure remains substantially lower than the peak of 11.1% seen two years ago.

Optimism for Future Rate Cuts

Economists are optimistic about the potential for further rate cuts as the year progresses. Borrowers hoping to secure new mortgage products by the end of 2024 will be encouraged by this possibility. This trend is not only beneficial for both new and existing borrowers but is also revitalising the housing market, evident in recent house price increases and rising sales volumes across the nation.

Recent data from Moneyfactscompare shows that many UK lenders have reduced their mortgage rates over the past week. This trend has prompted smaller, specialised lenders to follow suit, offering a wide variety of choices for borrowers at present.

Notable Reductions in Fixed Mortgage Rates

By the end of last week, several major high street lenders had announced reductions in their fixed mortgage rates. For example:

• Lloyds Bank cut its fixed rates by up to 0.32%.
• Halifax also reduced rates by up to 0.32%.
• TSB lowered its rates by up to 0.25%.
• HSBC made cuts of up to 0.24%.
• NatWest saw reductions of up to 0.16%.

Building societies joined the trend with notable rate cuts:

• Nationwide decreased fixed rates by up to 0.26%.
• Skipton Building Society reduced rates by up to 0.40%.
• Leeds Building Society lowered rates by up to 0.35%.

Other competitive lenders included:

• Furness Building Society with reductions of up to 0.35%.
• Cumberland Building Society offering cuts of up to 0.20%.
• Yorkshire Building Society and Family Building Society, both reducing rates by up to 0.20% and 0.30% respectively.
• Monmouthshire Building Society with cuts of up to 0.20%.

Smaller lenders such as Kensington, MPowered Mortgages, and Gen H also adjusted their fixed mortgage rates downward over the past week.

A Revitalised Housing Market

This landscape of reduced lending rates not only makes borrowing cheaper but also signals a revival in the housing market. Increased affordability and renewed confidence among prospective buyers and investors are driving a resurgence in market activity.

Rachel Springall of Moneyfactscompare commented, “The ongoing trend of rate cuts is a positive development for the mortgage market, with lenders striving to attract borrowers.”

Improvements in Buy-to-Let Mortgage Rates

The buy-to-let sector is also benefiting from the recent rate reductions. Over the past week, Accord Mortgages cut rates on its buy-to-let range by up to 0.20%. Similarly, The Mortgage Works reduced rates on selected buy-to-let products by up to 0.10%, with rates now starting from 3.49% for landlords. This includes reductions on rates for limited company buy-to-let products.

Landbay has also adjusted its rates, introducing a new selection of two-year and five-year fixed rate products. Molo Finance, the UK’s first fully digital mortgage lender, has made competitive rate cuts across its offerings for UK residents, expats, and non-UK residents. This includes rates for properties such as houses in multiple occupation (HMOs), multi-unit freehold blocks (MUFBs), holiday lets, and new-build properties.

The current environment of falling mortgage rates and increased lender competition is promising for both new and existing borrowers, reflecting a more dynamic and accessible housing market.