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High street lenders announced further reductions in UK mortgage rates on Tuesday, although the average prices remain above the levels they reached in the immediate aftermath of last year’s disastrous “mini” Budget.
The latest cuts come in the wake of comments by Bank of England governor Andrew Bailey last week that the UK could avoid further rate rises.
“There’s been a bit of a shift in markets over the last week or so,” said Aneisha Beveridge, head of research at estate agency Hamptons. “Since Andrew Bailey came out with his comments, swap rates [which banks use to price mortgages] are down a little bit.”
Nationwide, the UK’s second-largest mortgage lender, will reduce costs by as much as 0.29 percentage points while Santander, the fourth-biggest provider, will trim costs by as much as 0.14 points. Smaller lenders such as Hinckley & Rugby Building Society, Skipton Building Society and MPowered Mortgages have already pushed through cuts.
Last week, Bailey told MPs that interest rates, which are at 5.25 per cent after 14 consecutive rises, were “much nearer” to the top of the cycle.
The BoE is expected to increase base rates by another quarter point next week but investors are split on whether there will be one further rate rise before the end of the year.
Beveridge said the recent cuts to mortgage rates were in part owing to the markets anticipating that base rates would gradually start to fall from next year. “Lenders take the swap rates all the way through to [the end of their term], so they’re already pre-empting those base rate cuts for next year,” she said. “You might be starting to see mortgage rates fall a bit more now and less next year if [base] rates stay higher for longer.”