BANKS and building societies have slashed fixed mortgage costs despite the Bank of England’s latest interest rate hike.
The central bank raised the base rate from 4% to 4.25% last week in a move which would usually see a blanket rise in the cost of borrowing for households.
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Indeed, if you have a tracker mortgage that follows the base rate, you can expect your interest payments to rise in line with the Bank’s increase, if they haven’t already.
Standard variable rates (SVR), which borrowers land on after a mortgage fix ends, have also been rising.
However, fixed mortgage rates have bucked the trend and many lenders have actually cut mortgage costs since the Bank of England’s hike.
HSBC and Nationwide are among the big name banks that have cut rates.
This is good news for home buyers, as well as anyone coming towards the end of a mortgage deal.
Average rates are now at their lowest level in six months, according to data from research firm Moneyfacts.
The average five-year mortgage has fallen to 5.08% down from 5.2% in February while typical two-year rates have fallen to 5.39% from 5.44% last month.
Rachel Springall from Moneyfacts said: “The momentum in the residential mortgage market is positive, as fixed rates fell and product choice stabilised month-on-month.
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“Lenders have continued to reduce fixed rates, with the average five-year fixed rate resting below the equivalent two-year.”
In part, fixed rates are not rising in line with the base rate because lenders had already priced in the latest hike.
The markets that lenders use to price mortgage costs have also stabilised since being shaken by September’s Mini Budget.
The Bank of England’s base rate is now expected to peak well below the 6% previously feared.
We list the major banks and building societies that are making changes to rates following last week’s announcement, including cuts.
Nationwide
Nationwide has reduced rates across both fixed and tracker mortgages since the base rate rise by up to 0.45 percentage points.
This applies to remortages for two-, three- and fiver-year fixes and two-year trackers that have a 90% loan to value (LTV).
For example a two year fix with a 60% LTV and no fee is now 4.49% – a 0.45% drop.
Another mortgage for the same period but with an LTV of 80% and £999 fee, has been reduced by 0.25% to 4.59%.
For first-time buyers and new customers the rates have dropped by up to 0.35%.
Barclays
Barclays will be increasing the rate of its Residential SVR from 7.49% to 7.99% on May 1.
The lender will also be hiking the rate on its buy-to-let (BTL) SVR from 8.49% to 8.74% on the same date.
Both rates track the Bank of England base rate, so whenever the rate goes up or down, customers will see their interest rate change accordingly.
Natwest
Natwest told The Sun there have been no changes to any of its current rates since yesterday’s announcement.
Lloyds Bank
Lloyds Bank told The Sun its mortgage rates remain under review.
HSBC
HBSC has made a number of cuts to mortgage rates, across both its residential and buy-to-let ranges.
Home mover deals have been cut by up to 0.15% while remortgage rates have been trimmed by up to 0.05%.
For existing customers some rates ave been slashed by 0.20%.
For example its five-yer fix with an 85% LTV is down to 4.39%.
The lender’s SVR has not changed and remains under review.
Santander
All Santander and Alliance & Leicester tracker mortgage products linked to the base rate will increase by 0.25% from the beginning of May 2023.
This includes the Santander Follow-on Rate which will increase to 7.50%.
Santander said its SVR is still under review and there have been no immediate changes.
Coventry Building Society
Coventry Building Society said it is currently reviewing all of its variable mortgage rates.
But mortgages that track the base rate will automatically increase from May 1.
How can I save on my mortgage?
If you are on a fixed rate mortgage there will be no immediate change to your mortgage repayments.
However, borrowers on a tracker or SVR are likely to see increases coming through on their bills.
Someone with a £150,000 mortgage can expect to pay an extra £25 a month if they are on a current SVR rate of 7.49% that rises in line with the base rate to 7.99%, according to calculations by L&C Mortgages.
David Hollingworth, associate director at the mortgage broker firm, said: “Fixed rates have already improved substantially with five-year rates still below 4% and there’s nothing, so far, to suggest that will change significantly.
“Borrowers eyeing a new fixed deal would be better to take a deal now and keep it under review, rather than hold off in the hope of lower rates to come.”
Anyone coming of a fixed rate mortgage looking for a new deal is likely to find rates higher than whey they last looked.
But the rates have come down from recent record highs, and some banks are still making cuts, as above.
You can get a new mortgage deal up to six months before yours comes to an end, depending on the bank.
That means you can lock in a rate now. You don’t have to take it if you find a better deal when it does end. And if rates are higher you can go with the one you’ve locked in.
Anyone coming off a fix on to their lenders SVR could be paying more than they need to though.
According to Moneyfacts the gap between SVRs and fixes is now at its highest since 2008.
Getting the best rate on your mortgage can depend on the rates available at the time, but there are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan to value ratio has changed this could also give you access to better rates than before.
A change to your credit score or a better salary could also help you access better rates.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also got to a mortgage broker who can compare for you, but you may have to pay for this service.
It could cost a couple of hundred pounds but it might save you thousands on you mortgage overall.
I’m a saver – what do these rates mean for me?
The hike is good news for savers as banks are set to raise the interest paid on accounts.
For example, HSBC has announced that its fixed rate savers rates are rising by up to 0.5 per cent.
However, high inflation can erode the value of any savings you have.
It means if you have £100 in the bank this year and inflation is 10.5%, the real spending power of that money is reduced to £89.50.
This is why it’s important to move cash to take advantage of the best savings rates on offer.
