HSBC and NatWest Cut Mortgage Rates Again as Rivals Tipped to Follow

In a move that’s set to bring relief to UK homebuyers and those seeking remortgage deals, HSBC and NatWest have announced significant cuts in their mortgage rates. This decision follows a trend of UK lenders reducing their rates since the second half of July, signalling a potential shift in the housing market. In this blog post, we’ll delve into the details of these rate cuts and the broader implications for both consumers and the UK economy.

mortgage rates cut

A Rate Cut Frenzy

HSBC has taken the lead in reducing mortgage rates by announcing rate cuts across various fixed products, including offerings for first-time buyers, home movers, and those looking to remortgage. These changes went into effect on Tuesday, 5th September, with full details of the reductions made available to the public.

Following suit, NatWest also lowered its mortgage rates starting from Tuesday. And on Friday 8th, they further reduced mortgage interest rates. This coordinated effort by these two banking giants is significant and indicates a trend in the industry.

The Impact of Andrew Bailey’s Statement

These rate cuts come on the heels of a statement by Andrew Bailey, head of the Bank of England, where he hinted at the possibility of halting interest rate hikes. He remarked that they are nearing the peak of the interest rate cycle. This statement had a ripple effect in the financial markets, with traders scaling back their bets on interest rate hikes. As a result, markets now predict a one-in-four chance that the Bank of England will maintain its rate at 5.25%, marking the first pause in 15 meetings, when they convene on 21st September. The previous peak of 6% is now expected to be 5.75%.

A Domino Effect

HSBC and NatWest are not the only lenders reducing their rates. TSB and Santander also joined the rate-cutting frenzy. This collective decision by multiple lenders is a response to new data indicating that surges in interest rates have started impacting house prices more significantly. According to Halifax, the average London home has lost nearly £23,000 in value over the past year, illustrating the urgency of these rate cuts.

Justin Moy, managing director at EHF Mortgages, emphasised the competitive nature of these moves, stating that high street lenders are vying for market share. While these initial reductions are welcome, it may require deeper rate cuts to make a substantial difference. Nonetheless, these reductions present improved conditions for homebuyers and those considering remortgaging onto new deals.

A Reprieve for Homebuyers

Mortgage costs had been steadily rising for months, but UK lenders began reducing their rates after inflation fell more than expected in June. This unexpected drop fueled speculation that the Bank of England might not raise interest rates as aggressively as previously anticipated.

Nicholas Mendes, a mortgage technical manager at John Charcol, noted that HSBC’s consistent rate reductions are a clear sign of their commitment to competitiveness. In addition to rate cuts, they’ve also extended loan terms to 40 years, demonstrating their dedication to attracting borrowers.

Accord Mortgages, a part of Yorkshire Building Society, also announced a 0.20 percentage point reduction in all its fixed rates starting from Tuesday. These collective moves by various lenders give consumers more options and potentially lower costs in the mortgage market.

The Avalanche Continues

The rate-cutting spree is showing no signs of slowing down. Last week, Nationwide Building Society reduced some of its fixed and tracker rates by up to 0.15 percentage points. According to Stephen Perkins, the managing director of Yellow Brick Mortgages, these reductions are beginning to feel like an avalanche. It’s highly likely that more lenders will join this trend, creating a domino effect in the industry.

It’s becoming apparent that lenders are grappling with the challenge of attracting new business, and lowering interest rates appears to be their primary tool for doing so.

The decision by HSBC and NatWest to reduce mortgage rates has triggered a wave of rate cuts across the UK banking sector. This coordinated effort, along with the Bank of England’s signals of a potential pause in interest rate hikes, has significant implications for consumers and the housing market. While these initial reductions are welcome news for homebuyers and those looking to remortgage, it remains to be seen how far this trend will go.