High street lenders have reacted to competition amid a barren purchase market, as well as cheaper wholesale money costs, by announcing further mortgage rate cuts. This morning, both HSBC and TSB announced cuts, following on from Virgin Money yesterday.
Highlights from Virgin included a 4.99% 2-year fixed remortgage up to 70% loan-to-value (LTV) with a 1% fee, and a 90% 5-year fixed purchase mortgage at 4.96% with a £1295 fee, while TSB cut a range of rates by up to 0.3%.
Brokers welcomed the news and said it should boost the property market as the year draws to a close.
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According to Charles Breen, director at Wellingborough-based broker Montgomery Financial: “As rates continue to snowball downhill, this is yet more great news for homeowners across the country.
“With more lenders reintroducing rates starting with a four, the housing market should pick up.
“Rates will keep falling as lenders are in a royal rumble for market share to hit their lending targets off the back of the positive news on the base rate and inflation.
“The inescapable fact is that to make money, lenders have to lend money and it’s clear that they are competing hard to lend it.
“The net winners are going to be mortgage clients with lower monthly payments. It’s game on.”
Kylie-Ann Gatecliffe, director at Selby-based broker KAG Financial, was equally upbeat: “Lenders are having to be more competitive than ever to stand out right now, as the rate reductions keep rolling in.
“These latest cuts are great news for those looking to get on the ladder, move or remortgage. It has been a rocky year so it’s great to see it ending with a fiery rate war.
“Hopefully, it will continue into the new year, to allow more buyers to bounce back with confidence of a more affordable outlook.”
Meanwhile, Stephen Perkins, managing director at Norwich-based broker Yellow Brick Mortgages, defined the battle for market share as explosive: “Christmas is coming early to homeowners across the country as more of the top lenders reduce their rates following the recent positive news on inflation and growing confidence in the short-term economic outlook.
“The competition for market share during the rest of the year looks set to be explosive, so this is a fantastic time to secure a rate on your next mortgage.”
Gary Boakes, director at Salisbury-based broker Verve Financial, said the latest rate cuts were already rippling through into increased demand among first-time buyers and home movers: “With swap rates having dropped by around 0.5% over the past month, it is no surprise we are seeing rates reduced and lenders making headline plays for business at the end of the year.
“I have already seen that rates dropping below 5% is having a positive knock-on effect on the market, with more first-time buyers out looking and home movers looking to put their property on the market.
“With the continuation of positive news, the market is only going to improve going into the new year.”
Justin Moy, managing director at Chelmsford-based broker, EHF Mortgages, is seeing much the same thing: “Following the lead from Barclays at the end of last week, other High Street lenders are heating up the market for both homeowner and remortgage cases, with cuts of up to 0.3%.
“We are definitely seeing a pick up of purchase cases, mostly first-time buyers who see current property prices and falling mortgage rates as a good opportunity to buy.
“This is especially the case in London and the South East, an area struggling with poor rental stock and high rents.
“Here, even people with a small deposit will pay less per month, and have the security of their own property, if they buy, and do not need to worry about their landlord evicting them at short notice as they exit buy-to-let.”
Aaron Strutt, product and communications director at London-based broker, Trinity Financial, added: “Competition has returned to the mortgage mortgage market in earnest with most of the big providers now consistently lowering their rates.
“They are actively undercutting each other and trying to offer the lowest deals after a prolonged period of avoiding the best buy tables.
“Lenders are increasingly offering more sub-5% deals but ultimately they need to be closer to 4% to get the market moving again.
“Unless the Chancellor announces something significant in the Autumn Statement tomorrow, lenders will have to do something pretty significant to get more mortgages agreed.
“Lenders know cheaper rates are the key driver to get people buying homes again.”
Meanwhile, Simon Bridgland, director at Canterbury-based broker Release Freedom, said the sheer volume of rate cuts we’re seeing at present shows the value of using a broker: “With rates being cut on an almost daily basis, this is when a broker proves their weight in gold. Only a broker will re-broke the case again and again for you.
“If you think a lender will do the same if you go direct, think again.
“This is fantastic news as it means cheaper deals all around, and though it might take a week or so before the smaller lenders follow, follow they must.
“The other big names will no doubt issue their own reductions throughout the rest of the week.”
But one broker said the changes we’re seeing still amount to a phoney war, as they are all lower loan-to-values (LTVs).
Darryl Dhoffer, director at Bedford-based broker, The Mortgage Expert, said: “Once again, the biggest reductions are at the “safe as houses” end of the market, namely for those with a 40% deposit or a similar level of equity.
“Lenders need to put an end to the phoney war and drive down rates at higher loan-to-values, as that’s the way to inject real life into the mortgage and property market. We need less PR and more of a concerted push.”
Michelle Lawson, director at Lawson Financial, agreed with Dhoffer: “It is great to see the competition and the drive for lenders to attract business in the lower loan to value tiers.
“It would be even better to see this spread amongst the greater risk 90 to 95% loan to value brackets so hopefully the confidence will continue and this will help first-time buyers get back into the market which is much needed.”
But Ben Tadd, director at Chippenham-based broker, Lucra Mortgages, said the latest cuts had the potential to inject impetus into the market: “This latest round of rate reductions spells further good news for prospective purchasers and will help to inject some confidence into the market that mortgage payments on the whole are becoming more affordable across the board.
“Those would-be buyers who are keen to move but have been reluctant to act because of soaring rates now have their ears pricked up at the sound of rates tumbling further.
“As the rate war rumbles on with lenders competing for market share, this will help inject real impetus into the property market with purchase transactions likely to be on an upward trajectory.”
Elliott Culley, director at Hayling Island-based broker, Switch Mortgage Finance, concluded: “Competition continues to heat up between mortgage lenders as swap rates continue to fall.
“More lenders are now bringing out 2-year fixed rates under 5%, which is great news. It’s also good to see Virgin Money continuing to support the buy-to-let market with reduced rates and competitive fees.”
