Mortgage lenders are jostling for business and preparing for a “price war,” experts have said.
Multiple major banks and building societies, including Halifax, HSBC, Barclays, Santander, and Nationwide have cut rates on their home loans already this week.
And mortgage brokers expect further reductions this month.
Swap rates, the rates at which banks lend to one another and a major determinant of mortgage pricing, have fallen in recent weeks, which gives lenders more room to decrease costs for households.
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These rates tend to follow long-term predictions for where the Bank of England base rate will go in the future.
Nick Mendes, mortgage technical manager at John Charcol, said: “I would expect further reductions from lenders throughout July.
“There is still plenty of margin for lenders to reduce further, particularly given how tight they have been prepared to go in recent months to win business where necessary.
“It is not a full-blown price war just yet, but the ingredients are there. Lenders are clearly jostling for position ahead of the summer spike in remortgaging and home moving.
“If another major lender that’s repriced this week follows up again in the coming days, it could easily trigger another round of cuts – and then the price war is most certainly on.”
The Bank of England Governor Andrew Bailey has appeared to confirm more cuts to the base rate were on the way later this year.
In addition to this, brokers say that some reductions in rates from lenders could prompt other providers to drop rates in order to compete for customers.
Lewis Shaw of Shaw Financial Services said: “It’s odds on that mortgage rates will continue to fall after the commentary of Andrew Bailey, highlighting further base rate cuts, coupled with a worsening economic outlook.
“We’re also entering a quieter time as children break up from school in a few weeks and people start thinking about being on the beach rather than moving home so it makes sense for lenders to sharpen their pencils, especially given the size of mortgage renewals due to mature in the second half of this year.”
The average two year fixed rate is 5.07 per cent, according to Moneyfacts, whilst the average five year is 5.06 per cent.
However, there are several fixed rates available for under 4 per cent although they are reserved for people with the biggest deposits or equity.
Elliott Culley of Switch Mortgage Finance added: “Currently the forecasts look good to see further rate reductions in July.”
But he also cautioned: “We know forecasts can change quickly in the mortgage market, so still worth taking advantage of the rates whilst they are here.”
Andrew Bailey, the Governor of the Bank, said when speaking to CNBC on Tuesday: “I think that the path of interest rates will continue to be gradually downwards. I haven’t changed my mind on that.”
While Mr Bailey stopped short of confirming a cut in August, his remarks have been interpreted by economists as a strong indication that a reduction is likely.
Interest rates currently sit at 4.25 per cent, but markets are increasingly pricing in the likelihood of two quarter-point cuts by the end of the year.
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