UK Mortgage Price War Returns: Major Banks Cut Rates to Revive Market

High street lenders have ignited a new mortgage price war as they compete for a shrinking pool of borrowers in the lead-up to the November Budget. Both HSBC and TSB have reduced their fixed-rate deals twice within a single week, while other major lenders — including Barclays, Santander, Halifax, NatWest, and Skipton Building Society — have also announced cuts in an effort to stimulate demand in a slowing property market.

The latest rate cuts mark a notable shift after months of relative stability in mortgage pricing. Santander has trimmed its fixed rates for homebuyers and remortgagers by up to 0.36%, while NatWest has reduced rates by as much as 0.21%, offering a two-year fix at 3.77%. Barclays has gone one step further, unveiling a 3.72% two-year fixed deal for Premium Banking customers with deposits of 40% or more. Meanwhile, both HSBC and TSB have implemented two rounds of reductions within a week — a rare move reflecting the urgency to attract new borrowers.

Falling gilt yields — the returns on UK government bonds — have been a key catalyst behind these reductions. The benchmark 10-year gilt yield has dropped from nearly 4.75% in mid-September to around 4.44%, allowing banks to borrow more cheaply in wholesale markets. Lower funding costs have enabled lenders to pass on savings to customers, fuelling hopes that competition could continue if economic conditions remain favourable. Analysts suggest that anticipation of a potential Bank of England rate cut before the end of the year has added further momentum to lenders’ repricing strategies.