Average interest rates on two year fixed mortgages have fallen below 5.5% for the first time since June last year, latest figures reveal today.
Data from analysts Moneyfacts shows that the average rate dropped 1 basis point (bp) to 5.49% today, a level not seen for 15 months.
The average five year fixed mortgage fell two bps to 5.15%.
The landmark came as a slew of lenders, including major high street players HSBC, TSB and Nationwide cut their rates on a “Lucky Friday the 13th” for borrowers and buyers.
Lenders have been engaged in an increasingly intense price war over recent weeks, scrambling to generate business in a still relatively subdued property market.
They have been able to take advantage of City swap rates that are still trending down in anticipation of further cuts in borrowing costs from the Bank of England.
Today HSBC said it was cutting rates “across its entire range of repayment and buy-to-let mortgages, with rate reductions of up to 0.15 percentage points for residential and 0.17 for buy-to-let.”
Its cheapest five year rate is now 3.82% for first time buyers, home movers and existing customers who have a deposit of at least 40%. Two year rates start at 4.14%.
Oli O’Donoghue, head of mortgages at HSBC UK, said: “We’re frequently reviewing our mortgage rates and aim to ensure we offer competitive value to our customers. We’re really pleased to be cutting rates again from today, across a broad range of LTVs, from 60% all the way up to 95%, to ensure we’re servicing the needs of customers with varied lending requirements.
“It’s also great to be in a position to offer better value in the remortgage space, which is where we’ve applied our most significant rate cuts. This will help support mortgage holders who are coming to the end of their fixed rate and are looking on the market for competitive options.”
Meanwhile TSB made its second round round of cuts in a single week just three days after reductions on Tuesday.
Rates of five year fixed mortgage are being slashed by 0.3% to 3.79% for borrowers with LTVs no higher than 60%, equivalent to a 40% deposit. That means TSB joins the growing ranks of the sub-4% club. For borrowers with a 25% deposit, the reduction is even bigger, by 0.35% to 4.14%.
Nationwide is cutting its flagship five year fixed rate offer to as little as 3.78% for borrowers on LTVs up to 60% and 3.94% for 25% LTV mortgages for new borrowers.
Aaron Strutt, product director at brokers Trinity Financial said: ”This is a pretty decent time to be applying for a mortgage given the scale of rate cuts we are seeing at the moment.
“After the mini budget many people thought it would be a lot longer before we saw so many sub-4% rates again.
“Funding costs have come down and lenders are finally passing on the price reductions. Many of the banks and building societies are not as busy as they would like to be and they are lowering their rates to increase demand.
“If you have applied for a mortgage recently it is important to monitor the rate and make sure you swap to a cheaper one with the lender if and when it comes available.”
There are so many price reductions at the moment that it is fairly common for borrowers to switch deals with their lender at least two or three times before their mortgage completes.”
A raft of smaller lenders are also making moves, including Mpowered, Clydesdale, Suffolk Building Society. Atom and Pepper,
Clydesdale is lowering prices by up to 39 basis points, with deals starting from 4.02% and product transfer exclusives from 3.99%.
MPowered is also cutting rates by up to 27bps, with some three and five-year fixed rates falling below 4%.
Suffolk Building Society is also lowering rates by up to 20bps on five-year fixes for purchase or remortgage.
Mortgage rates are falling because of intense competition at a time when City swap rates are drifting down in anticipation of more cuts from the Bank of England, potentially as soon as next week.
