UK Mortgage Rates See Significant Drops Amid Market Competition and Inflation Slowdown

Average fixed-rate mortgage rates have fallen more than 0.5 percentage points since peaking in July, according to Moneyfacts data, even before the BoE began cutting the benchmark rate that underpins borrowing costs.

The latest inflation data released on Wednesday showed that price rises in Britain fell faster than expected in October, falling from 6.7% the previous month to 4.6%, prompting investors to bet on a reduction in BoE rates next year.

HSBC became the latest lender to cut rates on Wednesday, by an average of 0.15 percentage points across its products, following similar moves by rivals Halifax, Virgin Money and Nationwide in recent days.

Mortgage brokers have seen a series of lenders cut rates in recent weeks to catch up with the general change in market pricing on future rates, a spokesman for the broker John Charcol told Reuters.

The average two-year fixed-rate mortgage was set at 6.19% on Wednesday, according to Moneyfacts data, down from a peak of 6.86% on July 26. The five-year average rate was 5.79%, down from a peak of 6.37% on August 2.

Some banks’ mortgage teams are also ramping up activity at the end of the year to try to meet the company’s year-end targets, and many are at risk of falling behind after a market collapse overall, said a consultant who advises lenders and who declined to be named because he was not authorized to speak on the matter.

Although the rate cuts will provide relief to borrowers looking for new mortgages, the outlook for the UK property market remains challenging. The country’s inflation rate also remains high compared to most other developed economies.

Separate data showed on Wednesday that British house prices fell in annual terms in September for the first time since 2012, underscoring weakness in the property market.

It is also unlikely that lenders’ cuts in fixed mortgage rates will be offset by variable rates that closely track the BoE rate.