Barclays and HSBC Cut Fixed-Rate Mortgage Deals: Other Lenders Expected to Follow Suit

Analysts predict cuts of up to 0.31 percentage points could spark a 'summer of savings' as Barclays and HSBC lead the way in the mortgage market.

HSBC and Barclays have announced significant cuts to their fixed mortgage rates, signaling a potential "summer of savings" for homebuyers and those looking to remortgage. Barclays led the charge by reducing rates by more than 0.25 percentage points on Tuesday, prompting a swift response from HSBC, which announced rate cuts across its home loans range effective Wednesday.

While new home loan rates have remained relatively stable in recent months, some deals have seen slight price increases. However, improvements in money market swap rates, which heavily influence the pricing of new fixed deals, have prompted these two major mortgage lenders to lower their rates, with others expected to follow suit.

Mortgage costs have fluctuated over the past two years, with prices of new fixed-rate deals reaching above 6% following Liz Truss's September 2022 mini-budget. Rates then dropped sharply at the beginning of this year, only to gradually rise again. Barclays' recent rate reductions include a two-year fixed rate for those with a 10%-plus deposit or equity stake dropping from 5.76% to 5.48%, and another two-year fixed deal falling from 5.13% to 4.88%.

HSBC's rate cuts, which are across its range, aim to kickstart a "summer of savings" for mortgage borrowers, following Barclays' lead. As more lenders join this trend, homeowners may finally experience the relief they have been seeking, although a broader market shift is necessary to truly stimulate the housing market.

With inflation falling in May to the Bank of England's 2% target and swap rates easing, these rate cuts could ignite a new wave of competition among lenders. While the Bank of England maintained interest rates at 5.25% for the seventh consecutive time at its latest policy meeting, the decision was described as "finely balanced," leading some economists to speculate about a potential rate cut at the next meeting in August.

Given that recent lender repricing has mostly involved rate increases, the potential for reductions is now on the horizon. Moneyfacts reported that the average rate on a new two-year fixed-rate deal is 5.96%, while the typical rate on a new five-year fix is 5.53%, both of which have remained steady in recent days.

The rate cuts by HSBC and Barclays could mark the beginning of a "summer of savings" for mortgage borrowers, with the potential for increased competition among lenders and relief for homeowners in the housing market.