Leading º£½ÇÊÓƵ banks are introducing more mortgage options for potential property buyers, according to the latest Bank of England data, as decreasing interest rates trigger what's being described as a "price war" on the high street.
The Bank's credit conditions survey indicated that there would be an increased availability of home loans, even though demand is expected to stabilise during the three months leading up to May, as reported by .
Furthermore, a surge in homeowners seeking to remortgage is anticipated as they quickly take advantage of the Bank's reductions in interest rates, with the possibility of further cuts in the near future.
A significant uptick in remortgaging activity was observed in the quarter ending December.
The findings coincide with Barclays' move to cut its two- and five-year fixed deals to 3.99 per cent, making it the first FTSE 100 bank to lower rates amid recent cuts from TSB, Coventry Building Society, Bank of Ireland and Co-op Bank.
Mortgage brokers have forecasted that the drop in borrowing costs could heighten competition among banks.
Emma Jones, managing director at Whenthebanksaysno, commented: "More lenders are now following the initial rate cuts that we saw last week and it's starting to feel like we could have a price war through the summer months."
In a bid to stay competitive, HSBC has made significant rate cuts across its residential and buy-to-let mortgage products, including new sub-four per cent five-year fixed rates.
Lloyds Banking Group, incorporating Halifax, Bank of Scotland and Lloyds Bank, has relaxed its affordability calculations, now permitting customers to borrow an additional £38,000.
HSBC has also made significant cuts to a range of rates across its residential and buy-to-let mortgage offerings, including the introduction of new five-year fixed rates under four per cent.
According to data from Rightmove, two-year fixed rates have seen a reduction of 0.42 per cent over the past year, dropping to 4.81 per cent. Meanwhile, five-year fixed rates have decreased by 0.13 per cent to 4.70 per cent.
Interest rate cuts anticipated
Interest rate reductions are widely anticipated in the market, with expectations that the Bank will cut interest rates at least three times this year due to potential deflationary impacts on º£½ÇÊÓƵ price growth caused by President Trump's tariffs.
In March, the Bank of England maintained rates at 4.5 per cent, compared to last year's peak of 5.25 per cent. Brokers are predicting further cuts in the upcoming months.
David Stirling, director at Mint Mortgage & Protection, commented: "It now feels like only a matter of time before other major lenders like Nationwide and Halifax are compelled to respond and sharpen their pencils. ".
He added optimistically, "With a Bank of England rate cut looking increasingly inevitable, the outlook for borrowers is, at least for now, decidedly positive."
Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), expressed to the Treasury Committee last month that lenders were being "too cautious" in their mortgage stress tests. He revealed that the FCA was considering changes to the regulation of mortgage lending to encourage home ownership.
Stress test rules, initially rolled out by the Financial Conduct Authority (FCA) to prevent a repeat of the financial crisis, were instrumental in shielding borrowers as mortgage rates started their sharp ascent at the tail end of 2021.
Paul Matthews, a director at the financial consultancy Broadstone, opined that the current Labour government would likely welcome the shift towards easier mortgage availability.
"It marks a hat-trick of economic good news for the Government in the past seven days after inflation fell more than expected this week and the economy expanded faster than anticipated last week," he explained.
Matthews went on to caution: "As rates fall, the loosening of credit conditions could boost economic activity by encouraging investment and consumption but it must be noted that the economy remains in a precarious situation."
He also highlighted the importance of household confidence in capitalising on the increasing availability of credit, yet he warned it remains fragile and susceptible to being undermined by potentially adverse outcomes from current global trade tariff discussions which could stir further market instability.
