Relief for homeowners and buyers as lenders cut mortgage rates

Mortgage holders and first-time buyers received a fresh boost as lenders continued cutting rates – with some fixed deals now available below 5 per cent.

A day after the Bank of England brought an end to a devastating series of interest rate hikes – holding the base rate at 5.25 per cent – lenders including NatWest, TSB, Nationwide and Virgin Money cut mortgage rates.

Some began cutting rates after a shock fall in inflation to 6.7 per cent was announced on Wednesday, signalling an end to the need for more aggressive action by the BoE.

And after the Bank’s decision to not hike rates on Thursday, others followed suit.

NatWest cut its fixed residential and buy-to-let deals by 0.31 per cent, it was reported, and Nationwide did the same, meaning first-time buyers and those moving homes can get five-and-10-year deals starting at 4.94 per cent.

Henry Jordan, director of home at Nationwide Building Society, said: “The fall in swap rates over recent weeks and following the announcement that Bank rate is being held at its current level means that we are able to make further rate cuts across the majority of our fixed rate mortgage range.

“These latest changes mean we’re now offering sub-5 per cent rates to borrowers whether they are buying their first home or moving to their next.”

TSB will cut some deals by as much as a quarter of a per cent today, meaning deals start from 5.09 per cent.

Virgin Money said its five-year deals will start from 4.97 per cent.

Yorkshire Building Society also dropped its five-year fixed rate deal to 4.99 per cent.

Despite some deals being available for less than 5 per cent, the average two-year fixed rate residential mortgage is 6.56 per cent, a slight drop from 6.58 per cent yesterday.

The average five-year fixed residential mortgage rate today is 6.06 per cent. This is down from an average rate of 6.07 per cent yesterday, according to MoneyFacts.

Thursday was the first time since November 2021 that the BoE has left rates stable after 14 consecutive increases, as it attempted to put a lid on runaway inflation. Officials still left the door open to further rises in the future, promising to “take the decisions necessary” to return inflation to a level of 2 per cent.

However, in a sign struggling homeowners could soon find some relief, economists and mortgage brokers predicted that any further increase in rates is “diminishing fast” and predicted they “are already at their peak”.

Andrew Bailey, governor of the BoE, said: “Inflation has fallen a lot in recent months and we think it will continue to do so. That’s welcome news. But there is no room for complacency.”

Justin Moy, founder of Chelmsford-based mortgage broker EHF Mortgages, said the Bank’s decision should “make lenders and borrowers alike salivate”.

And, reacting to mortgage rates dipping below five per cent, he said: “This is a welcome market reaction to the Bank of England rate announcement on Thursday.

“We are still not out of the woods just yet, but this is another positive step in the right direction.”