Three UK Banks Announce Reductions in Fixed-Rate Mortgage Costs

Barclays Bank, HSBC, and TSB announce reductions, reversing some of the price increases seen in recent weeks.

Three UK Banks Announce Cuts to Fixed-Rate Mortgages

The interest rate on a fixed mortgage remains unchanged until the deal expires, typically after two or five years, at which point a new deal must be chosen. Failing to do so results in switching to a variable rate, which is significantly more expensive.

Barclays Bank, HSBC, and TSB have announced reductions in the cost of fixed-rate mortgages, reversing some of the recent price increases.

Barclays will lower the rates on five-year fixed-rate deals for new borrowers and those remortgaging by up to 0.45 percentage points starting Friday. For borrowers with a 40% deposit, the five-year fixed rate will decrease from 4.47% to 4.34%.

HSBC will implement cuts to two-, three-, and five-year home loans and has withdrawn its 10-year fixed-rate mortgages for remortgage customers.

TSB will also introduce changes on Friday, reducing two- and five-year deals for house purchases by up to 0.10%.

In recent weeks, lenders had been raising mortgage prices as the likelihood of a spring interest rate cut from the Bank of England diminished. However, this week has seen a decline in money market “swap rates,” which most fixed-rate deals are based on.

Mark Harris, chief executive of mortgage broker SPF Private Clients, commented, “This latest round of mortgage rate reductions from some big lenders is great news for borrowers. They come on the back of a decline in swap rates, which underpin the pricing of fixed-rate mortgages, over the past week. These cuts should give other lenders confidence to make similar reductions, which will stimulate activity and provide a welcome boost for the market.”

According to financial data firm Moneyfacts, there has been little movement in mortgage rates in recent days. The average two-year fixed residential mortgage rate remains at 5.92%, unchanged from the previous day, while the average five-year rate stands at 5.49%.

Despite the rate cuts, those remortgaging from a two-year fixed-rate mortgage will still face a significant increase in repayments: in May 2022, the average cost of such deals was 3.03%.

A Reuters poll published on Thursday revealed that just over half of the economists surveyed expect the Bank to reduce rates to 5% in August, while slightly more than 43% anticipate a cut could occur in June.