The mortgage price war is “still raging” as three of Britain’s biggest lenders cut their rates again.
NatWest will lower theirs by up to 0.23 per cent on Friday, following Santander, Virgin Money and Clydesdale Bank, who have all done so this week.
TSB has also announced cuts of up to 0.1 per cent on first-time buyer and home mover two-year and five-year fixed rates. It will also be dropping two-year fixes for remortgages by up to 0.15 per cent.
It is the second time this week that TSB has announced reductions, after lowering residential and buy-to-let mortgages by up to 0.2 per cent.
Meanwhile, Halifax has announced it is cutting rates by up to 0.22 per cent on Friday.
The latest cuts follow weeks of downward pricing by lenders ahead of the next Bank of England interest rate decision in August.
Previously, economists expected the Bank’s base rate to fall in August. However, the latest inflation figure, which saw the headline figure stay steady at 2 per cent, has dampened expectations, with most economists now forecasting a cut in September.
Despite this, mortgage rates are slowly decreasing across the board. Two weeks ago, the average two-year fixed mortgage was 5.97 per cent, and the average five-year deal was 5.53 per cent.
Now, after numerous reductions, including moves by major lenders such as Halifax, Nationwide and more, the averages sit at 5.91 per cent and 5.49 per cent, according to Moneyfacts.
Experts expect rates may continue to fall, with brokers predicting that deals of below four per cent – for those with the biggest deposits or equity – could be a possibility within weeks.
Hannah Bashford, director at Model Financial Solutions, said: “The war of rates is still raging. Not one to be left behind, even though they’re small changes, the rate changes from NatWest are symbolic given the recent inflation data.
“Hopefully the competition between banks and a tussle to be at the top and win business for the second half of the year will mean rates continue to fall throughout the summer.”
Justin Moy, managing director at EHF Mortgages, said the “significant” move by NatWest and TSB would appeal to new borrowers in the lender’s quest to stay competitive.
He added: “Even with sticky inflation, lenders are looking to jump on a positive wave of mood as activity increases.”
The speed of rate cuts is closely linked to inflation. If inflation falls from its current level of 2 per cent, this could accelerate rate drops, and cement a Bank of England base rate reduction in August.
However, there are worries that prices could rise again in the winter, so banks may err on the side of caution when it comes to offering cheaper deals.
Fixed mortgage deals broadly follow swap rates – which are based on long-term predictions of what will happen to the Bank of England base rate – but they can also be influenced by banks’ desire to attract business if more people are looking to buy homes.
A panel of experts told i the Bank of England’s Monetary Policy Committee (MPC) will now be unlikely to cut the base rate until September.
Willem Buiter, a former member of the MPC, said: “I expect the MPC will keep the rate unchanged on 1 August. If we get another month of headline inflation in the low 2s, we could see the first 25 basis points cut on 19 September.”