Race for sub-5% mortgage rate heats up

Mortgage rates could be set to finally fall below 5%, brokers claim.

The pricing of home loans has rocketed this year amid high inflation and rising interest rates.

But as inflation eases and the Bank of England held the base rate at its latest meeting, lenders are now responding with rate cuts.

A drop in the cost of finance could help boost buyer demand.

Halifax has today unveiled new pricing on its mortgages, including a two-year fixed rate for a 60% loan-to-value home purchase loan at 5.14%. Virgin Money has also released a two-year fix at 5.05%.

Justin Moy, managing director at Chelmsford-based EHF Mortgages, told the Newspage agency: "This looks to be the start of the next wave of rate cutting by lenders, buoyed by the recent hold to the base rate and falling swap rates. Increasing competition will only benefit borrowers, so any saving is really appreciated."

Jamie Lennox, director at Dimora Mortgages, added: “Halifax is heading back into the fight for low loan-to-value mortgages as the race for a lender to offer a sub-5% 2-year fixed rate heats up.

“As 2023 is dwindling, time is against most lenders to make up their market share before the year is up and we'd expect more lenders to make price reductions in the days and weeks to come.”

But not everyone was impressed. Craig Fish, director at Lodestone Mortgages & Protection, described the cuts as average.

He added: “It's good to see lenders reducing rates, but these are very average at best and certainly don't stand out in the rates charts. What we need is a lender to stick their head above the parapet, and offer some market-leading rates to get some competition back into the market. Perhaps they're all planning on starting next year with a bang.”