A number of lenders have announced mortgage rate cuts in the wake of The Bank of England's decision to cut the base rate last week. Santander, Barclays, TSB and Coventry Building Society have all announced reduced rates over the last week, including the now elusive sub-4% deal. There were signs that rates were finally starting to fall as early as last autumn, but they were subsequently hindered by rising inflation, so the latest rate reductions will come as encouraging news for borrowers who have been patiently waiting it out over the last few months.
Which lenders are cutting rates and who will they benefit?
Santander announced it would cut its two and 5-year fixed rates to 3.99% from the 13th of February for borrowers with at least 40% deposits or equity. The deal will benefit residential homebuyers as well as those looking to remortgage but comes with a relatively high product fee of up to £1,999. Barclays has similarly announced it will offer a 5-year fixed rate deal for Premier customers at 3.99% with a product fee of £899. Lloyds currently offers a 3.98% deal on a 5-year fixed basis for customers who are able to meet the 60% loan-to-value criteria. While TSB Bank and Coventry BS did not breach the 4% rate barrier, both banks announced cuts to some of the mortgage products they offer.
Although the biggest winners from this first flurry of rate cuts seem to be those with larger deposits or equity in their homes, these early movements will raise hopes for all borrowers that the market is beginning to shift. Borrowers with 5% to 10% deposits have seen a steady increase in the number of mortgage products available to choose from in the market, as these reached the highest number since March 2020. With affordability continuing to pose a challenge, as well as the impending stamp duty changes that will lower the thresholds for relief, more choice could help first-time buyers secure a deal.
You can easily find the best mortgage deals based on your specific circumstances using our mortgage rate comparison tool or check rates listed in our regularly updated article, "Best mortgage rates in the UK".
Why are mortgage rates starting to fall?
Borrowers have been faced with uncertainty as rates that began to fall in August last year started to creep back upwards moving into November and December. There wasn’t last year’s price war as the new year came around and rates remained fairly unchanged throughout January.
The market is now showing signs of brightening - in what was a widely expected decision, the Bank of England voted to cut the base rate from 4.75% to 4.50% when the Monetary Policy Committee (MPC) met last week. The Governor of the Bank of England, Andrew Bailey, suggested that the market had likely already baked in the rate cut, suggesting that consumers were unlikely to see much change in light of the committee’s decision. However, there may have been extra glimmers of positivity due to the fact that the vote was unanimous in cutting the rate, with two members even voting to cut the rate to 4.25%. Lenders will feel somewhat emboldened by the BoE’s views and the recent downward trend in swap rates - the rate at which banks lend to one another - as these had remained relatively stagnant since the beginning of the year up until the end of January.
Despite the fact that inflation is above the BoE’s target of 2% - it currently sits at 2.5% - and is expected to increase over the course of 2025, the MPC sent signals that further cuts to the base rate could still be expected. Growth seems to be at the centre of this decision-making as increased consumer activity should strengthen the economy and lower interest rates could support this. Lenders have responded optimistically to the MPC's commentary around building towards growth as it looks to allow outside factors to settle down. Much has been made of the noise coming out of the new administration in the US around tariffs and geopolitical standing, but it seems that the MPC is keen to remain steadfast until matters become clearer while remaining alert to change.
How to secure the best mortgage rates
If you are looking to purchase a new home or remortgage from an expiring mortgage deal (as 1.8 million people are expected to be doing this year), you may feel confused as to when to act and which deals will provide you with the right solution. In addition to securing a home, many borrowers will be keen to gain stability and security with the decisions that they make. Mortgage seekers are asking whether it is a good idea to lock into a fixed rate and if so, for how long while considering whether tracker rate deals may offer rate reductions as the base rate reduces. These are complex questions and will require expert help so it is best to speak with a qualified mortgage broker who can assess your specific needs before guiding you to the right options.
You can find a mortgage expert in your local area based on customer reviews using the online professional directory, Vouchedfor*. You will find regulated mortgage brokers alongside their specialist services if you need them. A mortgage broker can search hundreds of mortgage deals using expert knowledge and often have access to lenders' deals that are not available without the use of an intermediary, making your mortgage search easier and more efficient.
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