UK Mortgage Cuts: Should You Wait for a Better Deal?

Mortgage rates across the UK are falling fast, driven by base rate cut expectations and recent UK mortgage cuts. Yet, as tempting as it may be to wait for even cheaper deals, the decision isn’t always straightforward.

A Wave of Reductions Across Major Lenders: UK Mortgage Cuts

Several of Britain’s largest lenders have slashed mortgage rates in recent days, signalling a clear shift in the market.

This week alone, HSBC has made two rounds of cuts, launching over a dozen fixed-rate deals below 4% – a milestone not seen since 2022. Santander, meanwhile, is set to roll out 50 new mortgage products next week, including three-year fixed options alongside the familiar two-, five-, and ten-year deals.

Other banks have followed suit. NatWest introduced rates as low as 3.88% for homebuyers, Barclays announced reductions, and Halifax now offers the market’s most competitive two-year fixed rate at 3.79% for remortgages – a notable drop from its previous 4.10%.

Spotlight on HSBC’s Latest Offers: UK Mortgage Cuts

HSBC’s rate cuts have placed it in a strong position, particularly for those with significant equity or first-time buyers.

• For homeowners remortgaging with at least 40% equity, HSBC now offers a two-year fix at 3.89% with a £999 fee. On a £200,000 mortgage over 25 years, this equates to monthly repayments of £1,044.
• Premier banking customers can access even lower rates, such as 3.79% for a two-year fix when remortgaging with 40% equity.
• First-time buyers with a 5% deposit can secure a 4.99% rate with no arrangement fee. For a £200,000 loan over 25 years, monthly repayments come to £1,168.
• Buy-to-let landlords remortgaging with 40% equity can lock in a 3.79% rate, though they face a hefty £3,999 fee. On a £200,000 interest-only mortgage, this translates to £632 per month (excluding the fee).

Should You Hold Out for Even Lower Rates?

With rates falling, many borrowers – especially those remortgaging – wonder whether it’s wise to delay securing a new deal.

Aaron Strutt from mortgage broker Trinity Financial observes, “If you can afford to wait, it’s probably not a bad idea at the moment, as further base rate cuts are expected. We’ve historically seen fixed rates drop following base rate reductions, and if you can hold your nerve, you may well enjoy lower monthly repayments.”

However, there are caveats. Letting a fixed-rate deal lapse and slipping onto a lender’s standard variable rate (SVR) can erode any savings from waiting, as SVRs tend to be far more expensive.

Moreover, while an interest rate cut is widely predicted next week, it’s uncertain whether this will drive dramatic drops in mortgage rates.

Ravesh Patel, director at Reside Mortgages, cautions, “Yes, rates are going down, and that’s good news. But no one can guarantee that the trend will continue. Timing the market rarely works, and there’s plenty of uncertainty ahead. If you’re looking to buy, don’t necessarily hold off.”

A Flexible Approach: Securing a Deal in Advance

For those already in a fixed-term deal, it’s worth noting that many lenders allow borrowers to arrange a new mortgage several months before the current term ends.

Patel explains, “If you’re due to remortgage within the next six months, now’s a good time to speak to a broker. Many lenders will let you lock in a deal six months ahead. If rates fall further during that period, you can usually switch to the lower rate. But if they rise, you’ve already secured the best available deal.”

Why Are Mortgage Rates Falling?

Expectations around the Bank of England’s next moves are driving the current decline in mortgage rates. Markets now anticipate three or four base rate cuts this year, compared to the two predicted previously. This could bring the base rate down from 4.5% to somewhere between 3.75% and 3.5% by year-end.

Another crucial factor is the Sonia swap rate, which reflects the cost of borrowing between banks and shapes fixed-rate mortgage pricing. Over the past month, two- and five-year swap rates have dipped from above 4% to just over 3.5%.

As lenders price in these expectations, mortgage deals have become increasingly competitive. However, it’s important to recognise that much of this anticipated easing is already factored into today’s fixed-rate offers. Any shift in economic forecasts could swiftly alter this trajectory.

The Bottom Line: Weighing the Risks and Rewards

While the temptation to hold out for cheaper mortgage deals is understandable, borrowers should assess their individual circumstances carefully. Those with the flexibility to wait might benefit if rates continue to fall, but others risk paying more if they drift onto an SVR or if rates unexpectedly tick upwards.

Engaging a mortgage broker can help borrowers navigate this uncertain landscape, explore available options, and lock in favourable deals early – with the possibility of switching to even better rates later if the market moves in their favour.