Mortgage rates fall: Major lenders, including HSBC and Virgin, have cut interest

Big lenders have begun lowering mortgage rates, after the micro budget lifted them up and added hundreds of pounds to some homeowners’ bills.

HSBC is set to cut rates on five-year fixed mortgages for those with deposits of 25 per cent or more by up to 0.11 percentage point in the coming days.

This means that the cheapest rate for such a mortgage with the lender will be 5.37 percent, down from 5.48 percent previously.

Interest Rates Rising: Homeowners who are re-mortgaging or purchasing a new property have seen interest rates rise in the past few weeks due to economic instability

Interest Rates Rising: Homeowners who are re-mortgaging or purchasing a new property have seen interest rates rise in the past few weeks due to economic instability

Virgin Money is also lowering prices from today, now 5.49 per cent cheaper.

This is based on a five-year fixed rate for someone with a 25 per cent deposit, who pays a fee of £1,295.

Clydesdale Bank, also owned by Virgin, is cutting its rates for existing customers with deposits remortgaging 35 per cent or more by 0.1 percentage point, with cheaper rates now down 5.54 per cent on a five-year fixed deal from 5.64 per cent.

The bank also reduced a two-year fixed product at 65 percent loan-to-value from 6.00 percent to 5.90 percent for resident customers.

Accord Mortgages have announced that they will be lowering several of their rates tomorrow (October 26th) including low deposit products aimed at first time buyers.

In an email to brokers, the lender confirmed that it was reducing rates for 5 percent deposit products by up to 0.52 percent, and rates for 10 percent deposit products by up to 0.53 percent.

Higher deposit products are set to drop slightly by 15 percent and 25 percent by as much as 0.35 percent.

The lender also said it would launch a ten-year term product tomorrow.

The Coventry Building Society has also been set to reduce mortgage rates, although it is not clear by what margin.

David Hollingworth, mortgage expert at brokerage L&C, said: “This may be the first sign that more stable market conditions will give lenders an opportunity to lower interest rates where they can.

“It will take some time to feed off though, as many are still dealing with a spike in demand after the mini-budget.”

Mortgage rates hit a 14-year high last week, after former adviser Kwasi Quarting’s tax-cut mini-budget at the end of September rattled financial markets.

Increased interest: The price of fixed-rate deals has continued to rise since the end of last year, but this has accelerated since the government's mini-budget.

Increased interest: The price of fixed-rate deals has risen since the end of last year, but this has accelerated in the wake of the government’s mini-budget.

Constant rates averaged for two and five years 6.65 percent and 6.51 percent, respectively.

It follows the appointment of Rishi Sunak as Prime Minister, which was welcomed by housing experts saying it could lower government borrowing costs and restore some stability to the mortgage market.

Lawrence Bowles, director of research at estate agent Savills, said: ‘The uncertainty of the past few months has had a material effect on the staggering loan rates: the rate at which the UK government can borrow.

This, in turn, affects the cost of borrowing for the rest of us. It affects mortgage rates for homebuyers, development debt costs for homebuilders, and refinancing costs for real estate investors.

Anything that helps restore certainty and confidence to the market is likely to reduce borrowing costs.

This, in turn, will reduce the affordability pressure for families securing mortgage financing.

However, experts say mortgage rates are unlikely to fall back to the historically low levels that homeowners have enjoyed in recent years.

Tom Bell, UK head of residential research at Knight Frank, said: “Mortgage rates may be lower than in the period after last month’s mini-budget, but the 12-year period of ultra-low borrowing costs is over.

“With demand ebbing, so will 18 months of double-digit home price growth.”

A year ago, mortgage rates were nearly at their lowest, with the housing market booming, banks keen on lending and cheap borrowing costs due to the Bank of England’s base rate at an all-time low of 0.1 per cent.

Since then, the rate has gradually increased to 2.25 percent, driving up mortgage costs — although the micro budget has accelerated that.

This means that homebuyers and property managers who repair their two-year mortgage in 2021 may see the largest increases in their monthly payments when they reach the end of their repairs and need to remortgage.

The cheapest rate available on Oct. 18, 2021, for example, was just 0.98 percent.

Many will cross their fingers when prices start to fall in 2023, before they have to refinance.

On the Rise: A year ago, mortgage rates were at historic lows — but that's changed now

On the Rise: A year ago, mortgage rates were at historic lows — but that’s changed now

The bank’s Monetary Policy Committee is due to meet again on November 3 and is expected to raise the benchmark interest rate by 0.75 percent – the biggest rise yet.

Experts say this could lead to lenders continuing to lower their fixed rates, while raising their variable rates.

Ray Bolger, chief technical director of mortgage at broker John Charcole, said:

I expect over the next few weeks that other lenders will lower fixed rate costs and increase product selection. However, most of the variable rates will rise after the monetary policy committee meeting next week when the bank rate is expected to rise by 0.75 to 1 percent.

The combination of lower fixed rates and higher variable rates will narrow the large current gap between the two.

The market reacted very positively to the confirmation over the weekend of Boris’s withdrawal and Rishi’s appointment as prime minister, with a significant drop in gold yields and swap rates, which will allow lenders to cut interest rates further than the modest cuts just announced by HSBC and Coventry.”

What to do if you need a mortgage

Borrowers who need to find a mortgage because their existing fixed-rate deal is coming to an end, or because they’ve agreed to buy a home, are urged to act but not panic..

Banks and building societies are still lending and mortgages are still being accepted with applications accepted.

However, rates change quickly, and there is no guarantee that deals will stick and won’t be replaced by mortgages that charge higher rates.

This is Money’s best mortgage rate calculator powered by L&C that can show you deals that match the value of your mortgage and property.

What if I need to re-travel?

Borrowers should compare rates, talk to a mortgage broker, and be prepared to work to secure a rate.

Anyone with a fixed-rate deal that expires within the next six to nine months should consider how much a remortgage will cost now — and consider a new deal.

Most mortgage deals allow a fee to be added to the loan and then only charged when you take it out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I’m buying a house?

Those who have agreed to buy homes should also aim to lock in prices as early as possible, so they know exactly what their monthly payments will be.

Homebuyers should beware of overexerting themselves and be prepared for the possibility of home prices falling from their current high levels, due to high mortgage rates limiting people’s ability to borrow.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to talk to a good broker.

You can use our best mortgage rates calculator to show matching deals for your home value, mortgage size, term needs and flat rates.

Be aware that rates can change quickly, so the advice is that if you need a mortgage to compare rates then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

> Check out the best fixed rate mortgages you can apply for

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