In a significant move for the UK housing market, major high street lenders Santander and HSBC UK are set to implement another round of mortgage rate cuts this week, building on reductions made just days ago. This development comes as swap rates ease, despite ongoing market volatility linked to geopolitical tensions.
Santander's Latest Rate Reductions
Santander has announced plans to cut rates on lower deposit mortgage products for first-time buyers and home movers from Friday. This marks the second time the lender has reduced mortgage rates this month, following a previous round of cuts across its higher loan-to-value (LTV) products last Thursday.
From Friday, Santander will reduce first-time buyer, home mover, and remortgage fixed rates by up to 0.25 percentage points. Key reductions include:
- Santander's 98% LTV, My First Mortgage product will decrease by 0.25 percentage points to 5.60%.
- Two-year fixed-rate mortgages will be available at 5.83%.
- Five-year fixed-rate mortgages will be offered at 5.73%.
Additionally, Santander will launch new first-time buyer products, including a 5% deposit three-year fixed-rate mortgage at 5.55% with no fee and £250 cashback. The lender will also offer a 15% deposit two-year fixed-rate mortgage with a £999 fee and £250 cashback at 4.80%, as well as a 15% deposit five-year fixed-rate mortgage at 4.98% with no fee and £250 cashback.
HSBC UK Follows Suit
HSBC UK is also refreshing its mortgage range from Thursday, having previously cut rates last Friday. The changes will include rate reductions for first-time buyers, home movers, and individuals looking to remortgage. This move aligns with a broader trend among high street lenders, as Barclays and Skipton Building Society also reduced their mortgage rates on Wednesday.
Market Context and Swap Rates
The rate cuts come as swap rates, which lenders use to price mortgages, have been easing. However, the conflict in the Middle East has caused market volatility, pushing up expectations that interest rates may stay higher for longer. Despite these signs of fixed mortgage rates easing, typical rates remain elevated compared to the start of March.
According to financial information website Moneyfacts, the average two-year fixed homeowner mortgage rate on the market on Wednesday morning was 5.83%, down from 5.87% on Tuesday. Similarly, the average five-year fixed homeowner mortgage rate was 5.73%, down from 5.76% on Tuesday.
In contrast, at the start of March, the average two-year fixed-rate mortgage was 4.83%, and the average five-year fixed-rate mortgage was 4.95%, highlighting the current elevated levels despite recent reductions.
This wave of rate cuts by Santander and HSBC UK offers a glimmer of hope for prospective homeowners, particularly first-time buyers and those looking to move, as lenders compete in a volatile market. The repeated reductions this month suggest a potential shift in lending strategies, though experts caution that broader economic factors continue to influence mortgage pricing.
