Mortgage lenders in the UK have started the year by cutting interest rates, providing some relief to homeowners seeking new deals. The Halifax, the country’s largest lender, has reduced rates by almost one percentage point, and other lenders are expected to follow suit. HSBC has announced that it will also be making rate cuts in response to the “fast-moving market.”
However, homeowners are advised to carefully consider the terms and conditions of these offers. Aaron Strutt, a broker from Trinity Financial, explains that when lenders make significant rate cuts, they do not necessarily apply the same reduction to all of their products. Therefore, it is essential for borrowers to thoroughly review the options available to them.
Despite these rate cuts, mortgage rates will still be higher than what many people have been accustomed to in recent years. This is due to significant changes that have occurred in the mortgage market over the past two years.
Fixed-rate mortgages, where the interest rate remains unchanged until the end of the term, typically two or five years, are a popular choice for homeowners. However, once the fixed-rate deal expires, borrowers must choose a new mortgage product to replace it. Failing to do so would leave them on a variable rate, which can be very expensive.
Over the next 12 months, approximately 1.6 million homeowners will see their current fixed-rate deals come to an end. For the majority of these borrowers, this could result in a significant increase in their monthly repayments. However, due to competition between lenders, the financial impact may not be as severe as initially anticipated.
Halifax, for instance, is reducing its rates, with interest on a two-year fixed deal being cut by up to 0.83 percentage points. HSBC is also joining in with rate cuts, offering a two-year fixed rate for remortgages at below 4.5%, the lowest it has been since early June last year.
David Hollingworth, associate director at broker L…