UK mortgage rate cuts

Mortgage rate reductions are providing significant cost savings for UK borrowers as the market starts to price in a late-summer interest rate cut by the Bank of England.

On Friday, and for the second consecutive week, Halifax reduced rates on several mortgage products, joining other major lenders such as Santander, TSB, Virgin Money, and Cooperative Bank, all of which have lowered borrowing rates recently. Barclays, which initiated the current trend of rate cuts last month, now offers five-year fixed rates as low as 4.08% and two-year deals at 4.49%.

This wave of mortgage rate cuts coincides with expectations that the Bank of England will lower interest rates from their current 16-year high of 5.25% in August or September.

Recent inflation data for June showed that annual price increases remained steady at the central bank’s target level of 2%. As the likelihood of a base rate cut grows, stability in the economy is crucial to maintaining momentum.

The five-year Sonia swap rate, a benchmark used by UK lenders to price loans, has decreased to 3.8% from 3.91% a month ago. If current trends persist, mortgage rates could drop below 4% this year, potentially spurring property market activity and making home purchases and new fixed-rate deals more appealing to borrowers.