Mortgage lenders kick off new year by cutting rates as housing market struggles

Homeowners preparing for the end of their two-year fixed mortgage deals could save thousands of pounds in higher interest payments after major lenders kicked off the new year by cutting rates.

The Bank of England’s rapid base rate increases over the past two years, from historically low rates to its current 15-year high of 5.25 per cent, have fueled the anxiety of tens of thousands of homeowners whose time to renegotiate deals fixed rate loans that expire coming up this year. year.

But with competition among lenders increasingly fierce in a sluggish market that sees multiple cuts to the Bank of England’s base rate this year, Halifax, Britain’s biggest lender, kicked off 2024 by cutting its fixed mortgage rates by almost 1 percent on Tuesday.

By reducing its rates on its two-, five- and 10-year fixed agreements by up to 0.83 per cent, Halifax also reduced rates by up to 0.92 per cent for its existing customers.

Halifax’s cheapest two-year deal for customers with at least 40 per cent equity in their home is now 4.68 per cent, with a fee of £999, compared to an average of 5.93 per percent for fixed two-year deals across the market, according to Moneyfacts.

The building society’s 0.83 per cent cut on two-year fixed agreements (from 5.64 to 4.81 per cent) would see monthly payments on a 25-year mortgage for a £250,000 property fall by £122 a month, from £1,556 to £1,434, saving homeowners £1,464 a year.

Leeds Building Society also reduced the rates on its mortgage agreements by up to 0.49 per cent, with its cheapest two-year fixed rate now sitting at a rate of 4.6 per cent.

This comes after inflation fell again to 3.9 per cent in November, increasing pressure on the Bank of England to start cutting interest rates as both the economy and the housing market slowed.

The number of new first-time homeowners with a mortgage fell from a 20-year high in 2021 to a 10-year low in 2023, according to Yorkshire Building Society.

(Getty Images)

This bigger-than-expected slowdown in price rises (well below Prime Minister Rishi Sunak’s target of halving inflation from 10 to 5 per cent by the end of 2023) and Threadneedle Street’s decision to maintain its rate base at 5.25 for the third consecutive month had Both served to fuel the anticipation of new declines in the mortgage market.

“We expect lenders to come out of the situation in January fighting because they will be desperate to grab market share to make up for the lackluster year they have had in 2023,” said Riz Malik of R3 Mortgages. The independent At the time.

New estimates from Yorkshire Building Society suggest this week that the number of first-time buyers with a mortgage fell from a 20-year high of more than 400,000 in 2021 to a 10-year low of just 290,000 just two years later, falling by fifth.

“When January comes there will be more buzz in business and these guys will be much more competitive,” Malik said, adding: “It may take the first quarter for people to start getting going, but we are already seeing the outbreaks.” greens: more inquiries from first-time buyers, especially where rents have increased dramatically over the year.”

But leading economists also warned last month that mortgage holders exiting fixed-rate deals agreed two years ago would still face “a very different world”, while the slowdown in the British economy and higher mortgage costs mean levels of life “will continue to be quite desperate.

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