The UK is experiencing a drop in mortgage rates as the expectation of the BoE cutting interest rates in the middle of the year grows. Nonetheless, uncertainty is expected to persist and impact buyer confidence.
HSBC recently announced reductions in residential mortgage interest rates, with some dropping below 5% for the first time since April 2023. The most significant decrease was seen in its 10-year fixed-rate remortgage deals, with one dropping from 4.99% to 3.99%.
Halifax, the largest mortgage lender in Britain, also announced reductions in rates, such as its two-year fixed-rate remortgage which decreased from 5.64% to 4.81% this week.
This marks a significant change from last summer when the average rate for a two-year fixed deal reached a 15-year high of 6.66%.
Martin Stewart, director of mortgage advisory London Money, noted an increase in lender confidence driving positivity in the market for 2024 compared to the previous year.
Competition among banks has intensified, with lenders now striving to offer the most competitive rates. The average two-year fixed-rate residential mortgage rate in the U.K. was 5.87% as of January 4, down from 6.29% two months ago. Additionally, the average five-year fixed rate decreased to 5.53% from 5.87%.
Moneyfacts research also revealed an increase in available residential and buy-to-let mortgage products. These rate cuts coincide with signs of resilience in the U.K. housing market, as house prices only fell by 1.8% in the year to December, contrary to predictions of a 10% decline in 2023.
Moreover, recent data from the BoE showed a rise in mortgage approvals in November, reaching the highest level since June. The total of 50,067 approvals for the month exceeded the 48,500 forecast in a Reuters poll.