HSBC latest lender to cut mortgage rates as experts predict ‘others bound to follow suit’

HSBC has become the latest lender to cut mortgage rates amid predictions that more banks and building societies will follow suit in the coming weeks.

The high street bank said its new deals will be introduced on Thursday. They will include a two-year fixed remortgage rate of 4.49% and a five-year deal of 3.94%.

First Direct, a division of HSBC, is also set to announce mortgage rate cuts on Friday.

A HSBC spokesperson said: “Our new fixed mortgage rates will see significant cuts across the board which will be a welcomed move.

“Specifically, for customers wishing to remortgage, our rates will start from 3.94% for a five-year deal at 60% LTV [loan-to-value] with a £999 fee.”

It comes after Halifax, the UK’s largest mortgage provider, reduced its rates by up to 0.83 percentage points on Tuesday, including a two-year deal of 4.68% with a £999 fee.

Lloyds Banking Group, which owns Halifax, said its Club Lloyds division had also cut its rates by the same amount.

Meanwhile Leeds Building Society announced it had “decided to start strong in 2024” by reducing rates across its mortgage range by up to 0.49 percentage points.

Matt Bartle, the building society’s director of products, said: “In 2023 the mortgage market was constrained due to the ongoing pressure of the increasing cost of living, but as a lender we want to play our part to try to overcome the hurdles people face and help more people into homeownership.”

The UK’s average two-year fixed mortgage rate was 5.92% on Wednesday, down from 5.93% the day before, according to figures from Moneyfacts. It said the average five-year rate also dipped to 5.53%.

It comes amid expectations the Bank of England will cut interest rates this year as inflation falls.

Several other lenders cut their rates just before Christmas – including Barclays, which reduced its deals by up to 0.43 percentage points.

Nationwide said its mortgage rates were under “regular review”, while Virgin Money told Sky News it “monitor[s] the market closely”.

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David Hollingworth, associate director at L&C Mortgages, said: “These cuts are just the latest salvo in an increasingly fast-moving market…

“These cuts follow hot on the heels of new year improvements by Halifax and others will be bound to follow suit. We thought the new year would start with a bang and that’s proving to be the case.”

Aaron Strutt, product director at Trinity Financial, said: “The lenders will want to have the strongest possible start to the year.

“It seems highly likely that more banks and building societies will improve their rates over the coming weeks and fight it out to offer the cheapest deals.”

Simon Bridgland, director of mortgage broker Release Freedom, also told The Times that Halifax’s move could be the “start of a manic week” of rate cuts.

Mortgage rates have gradually eased in recent weeks and in December the average two-year deal dipped below 6% for the first time in nearly six months.