A “pricing war” may break out between mortgage lenders over the coming months as they try to win business, it has been suggested. This comes as mortgage rates have already began to slip in previous days.
Indeed, according to Rightmove’s latest mortgage tracker, the average five-year fixed mortgage rate now sits at 5.79% having been 5.86% last week. What’s more, the average two-year fixed mortgage rate is now 6.40%, down from 6.46% last week.
Commenting on this, Rightmove’s mortgage expert Matt Smith said “a continued period of stability” can be expected for now, and that “it appears lenders will continue to price competitively where they can”.
This has already continued to materialise. This week saw key lenders such as Nationwide and Santander announce cuts to their fixed mortgage rates of 0.4 and 0.2 percentage points respectively.
Other lenders cutting the cost of their new fixed-rate deals in recent days include Halifax, who reduced rates by up to 0.71 percentage points from Friday, with HSBC and TSB making similar moves.
NatWest also announced it was cutting rates on its house purchase and remortgage fixed home loans by up to 0.65 percentage points.
This, says Jonathan Rolande of the National Association of Property Buyers, may escalate into a “pricing war” between lenders before the end of the year in what would come as a boost to mortgage holders:
“We are likely to see banks become increasingly competitive to win business and that means cutting rates.”
He did, however, add the caveat that “a further rate increase looks increasingly likely” due to higher than expected wage inflation that “may drive prices up just as consumer spending seems to be getting back under control”.
Rolande concluded:
“The competition is very much on and all the banks are racing to try and win business. It’s been a very, very difficult year for mortgage holders so far. But this could be the chink of light we’ve all been waiting for.”
