Major mortgage lenders cut rates but experts warn further reductions may be delayed ...Middle East

Several major lenders have cut mortgage rates this week but global geopolitical uncertainty could hamper further falls, experts have warned.

The Bank of England held interest rates at 4.25 per cent this month after inflation failed to come down as much as hoped in May, falling by just 0.1 per cent to 3.4 per cent.

Despite this, some major lenders have been cutting their mortgage rates over the past couple of days in anticipation of further rate cuts by the Bank later this year.

Barclays cut its two-year fixed rate for those with a 40 per cent deposit or equity to 3.88 per cent, with a fee of £899, while TSB cut rates on some of its shared ownership products. Halifax, Skipton Building Society and Accord also made reductions.

Nationwide also has a 3.9 per cent two-year fix with a £1,499 fee, for mortgages between £300,000 and £5mn.

Banks and building societies base their own interest rates on the Bank of England’s base rate. If the Bank reduces the rate, mortgage lenders tend to follow suit, and vice versa.

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However, they also take into consideration what financial markets expect to happen over the medium term, and economists have been anticipating further base rate cuts this year.

Experts say mortgage rates could fall well below 4 per cent in the second half of this year if the Bank does continue to cut rates as expected.

However, they have now warned that the impact of global tensions risks driving inflation back up, which could delay further base rate cuts and create more of a “mixed picture” for mortgage rates this year.

David Hollingworth, associate director at L&C Mortgages, said lenders are trying to make cuts where possible, and more big lenders reducing rates could spur others to follow suit.

“These aren’t big cuts, but the market is so competitive that lenders will pass through improvements wherever they can, and as more take the chance to sharpen rates, the more likely it is that others will follow.”

Thomas Lambert, financial planner at Quilter, said: “If inflation continues to ease and the Bank follows through with those cuts, then we could see mortgage rates gradually fall further as we head into the second half of the year.

“But it’s not guaranteed. Global uncertainty, including tensions in the Middle East and the risk of rising oil prices, could drive inflation back up and delay rate cuts.

“That means the path for mortgage rates is still uncertain, and we’re likely to see a bit of a mixed picture for a while.”

However, he added that while the impact of the conflict hasn’t had a negative impact on rates so far, it could mean that rates continue to be cut in smaller increments than hoped.

The conflict has led to a significant rise in oil prices, which could have a knock-on impact on petrol and food prices, driving up inflation.

“With a good deal of uncertainty, we don’t know what may come round the corner, and although lenders are cutting rates, they are currently small adjustments,” Mr Hollingworth said.

For borrowers coming to the end of a fixed deal this year, experts say now could be a good time to start exploring options.

Mr Hollingworth said: “Borrowers should accept that rates aren’t about to plummet and they would be better grabbing a good deal now.”

You can generally lock in a fixed mortgage deal between three and six months in advance, but you can switch to a better deal later if rates fall in the interim.

Mr Lambert added: “For borrowers, particularly those coming to the end of a fixed deal, this could be a good time to start exploring options.

“There may be better deals available now than a few months ago, and shopping around or speaking to a mortgage adviser could be worthwhile.

“Just bear in mind that the outlook could shift quickly, depending on what happens in the wider economy.”

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