Jessica Beard Money Deputy Editor
00:31 04 January 2024, 01:17 01 2024 01 Updated
- Rishi Sunak is trying to drive home his vow to put more money in people’s pockets
Yesterday, the gun went off in the mortgage price war.
HSBC has become the first major bank to offer fixed rate deals below 4%, with rival lenders expected to follow suit.
Analysts say lower lending costs will ease pressure on household budgets and provide a much-needed boost to Conservative poll hopes. Rishi Sunak leaves today to take home a pledge to put more money in people’s pockets with National Insurance cuts starting from Saturday.
And with an election looming at some point this year, the Conservative Party is poised to consider further tax cuts. Those struggling with their mortgages are hoping that interest rates will start to recover sooner as HSBC ends its five-year fixed rate and lowers refinance rates for homeowners with 40% equity from 4.79% to 3.94%. You’ll see it.
Halifax on Tuesday announced plans to cut remortgage rates by up to 0.83 percentage points.
Aaron Strutt of Trinity Financial said: “Given the changes from Halifax and HSBC, some of the other big banks will need to raise interest rates in the coming days to attract borrowers, leading to further price cuts. It’s almost certain.”
He added that if interest rates were to fall below 4%, it would give hope to many people concerned about payment shock when refinancing their mortgages.
HSBC two-year deals are now available at 4.49%, falling below 4.5% for the first time since June, according to L&C Mortgages. The 10-year fixed rate is currently 3.99%. Experts said the latest rate cut signals the beginning of a fierce competition to lower interest rates across the mortgage market.
Ashley Webb, from the think tank Capital Economics, said lower housing costs would be an advantage for the Conservatives in future elections.
He said: “In the Autumn Statement, the Government will set out a series of tax cuts to put more pounds in people’s pockets to boost consumer confidence, and lower mortgage rates will have the same effect.”
“If interest rates continue to move in this direction, households will have more time to realize the benefits of lower mortgage rates and lower inflation, making it more likely that a general election will be held in the second half of the year rather than the first half.”
The new year has seen a flurry of interest rate cuts as financial institutions struggle to attract customers, with HSBC currently at the top of the best buy table. The next lowest remortgage deal after a big bank is from Generation Home, at 3.99%.
Halifax’s 0.83 percentage point reduction equated to a saving of £145 a month for someone taking out a £300,000 loan with 40% equity. Leeds Building Society and Generation Homes also announced on Tuesday cuts of up to 1 percentage point and 0.67 percentage points respectively.
L&C Mortgages broker David Hollingworth said he expected more rate cuts to come as lenders responded to “intense” competition.
“These job cuts are just the latest salvo in an increasingly rapidly changing market, following improvements made by Halifax, and other companies are bound to follow suit,” he said. “This is a welcome step for borrowers facing payment shock, as many anxiously await the expiration of modifications taken during the ultra-low interest rate period.”
An estimated 1.6 million mortgage holders will be forced into new contracts this year, reducing historically low interest rates. But they will now be protected from the worst rises in mortgage rates.
The average interest rate on two-year contracts was 5.92% yesterday, down from a peak of 6.86% in July last year. According to interest rate analyst MoneyFact Compare, the five-year interest rate fell to 5.53% from a high of 6.37%.
Average mortgage repayments for homeowners refinancing on a two-year term are now £175 per month cheaper than at the peak for someone with a £300,000 mortgage over a 25-year term. There is.
Nicolas Mendez of mortgage broker John Charcol said he expects mortgage rates to continue to fall in the coming months due to growing confidence in the economic outlook and expectations of lower interest rates.
Inflation fell more than expected to 3.9% in November, renewing hopes that the Bank of England would start cutting interest rates sooner than previously expected. The central bank kept the benchmark interest rate unchanged at 5.25% for the third consecutive time in December.
Despite the central bank’s insistence that a cut is not yet forthcoming, investors expect rates to be cut to 5% as early as May, Webb said.
Total mortgage lending across the UK will fall by 28% in 2023, with competition among lenders increasing. Bankers say homeowners are being forced to pause plans in the hopes that interest rates will continue to fall, with industry body UK Finance predicting they will continue to fall by a further 5%.
- Two-thirds of government funding to promote housing construction remains unspent more than six years after it was launched. The Housing Infrastructure Fund is designed to kick-start the construction of hundreds of thousands of properties across England. But yesterday the Financial Times revealed that of the £4.2 billion pot poured in 2017, only about 31 per cent has so far remained unspent. The fund was supposed to provide local governments with grants for key infrastructure such as transport and utility connections.