Lenders Starting to Cut Fixed Mortgage Rates

Two weeks ago, we were writing about 20-year record high mortgage rates and the prospect if even higher rates to come with two or three further Bank of England interest rate increases expected.

With inflation falling more than expected in June to 7.9% pa, it is anticipated that inflation will fall further over the coming months and therefore, whilst interest rates will increase in the short term, bankers are expecting interest rates to come back down much quicker.

This week, we have already seen big banking groups HSBC, Nationwide and TSB cut 5-year fixed rate mortgage deals along with a number of smaller lenders. Lloyds Banking Group (and its subsidiary Halifax) are also anticipating the UK not to move into recession as a result.

Comment

We suggest it is too early to bank on big rate falls.  We forecast interest rates to fall back only to ‘stable economy’ rates of around 4-5% pa, as they were pre-credit crunch crisis (2008) rather than the exceptionally low and virtually nil interest rates during the pandemic lockdown.

Never forget, 9 months ago 5 year fuxed rates went above 6% then fell back below 6% again and have since climbed again above 6% pa, so this is more than possible today too.