HSBC, Barclays and Yorkshire BS latest to cut mortgage rates

Three more mortgage lenders have announced that they will be lowering mortgage rates, marking a new shift towards lower mortgage costs.

Barclays, HSBC and Yorkshire Building Society have all cut their rates, after Santander and Halifax earlier this week.

Yorkshire BS has reduced its mortgage interest rate by up to 0.2 percentage points.

Thanks to the interest rate changes from both HSBC and Barclays, they offer some of the lowest interest rates on the market.

HSBC is offering a 4.39 per cent five-year fix to those who refinance with at least 40 per cent equity in their home. The deal comes with a fee of £998.

For people buying with a 25 percent deposit, HSBC is now offering the lowest interest rate on the market.

The 4.37 per cent five-year fix comes with a fee of £649. Someone buying with a £200,000 mortgage repaid over 25 years would pay £1,099 a month with this HSBC product.

Given that the average interest rate over five years is 5.51 per cent, this equates to a monthly saving of £130.

Barclays also offers a range of competitive deals, with five-year rates starting at 4.23 per cent and two-year rates starting at 4.68 per cent.

While the changes to Yorkshire BS are not as drastic, they are aimed at both buyers and homeowners.

Homeowners with 25 per cent equity in their home who switch their mortgage to a five-year mortgage with Yorkshire BS can now benefit from an interest rate of 4.69 per cent with a fee of £495, down from 4.89 per cent.

And homebuyers with a 25 per cent deposit can take out a two-year mortgage at 4.89 per cent, with a fee of £1,495, down from 4.99 per cent.

Mortgage rates have fallen since their peak in the summer of 2023, when they were 6.86 percent for a two-year mortgage and 6.35 percent for a five-year mortgage.

In recent weeks, interest rate cuts have accelerated, with the average two-year fixed-rate mortgage rate now at 5.93 percent, while the average five-year fixed-rate mortgage rate is now 5.51 percent.

Stephen Perkins, managing director of Yellow Brick Mortgages, told Newspage: ‘Two more major banks have joined the battle for the lowest mortgage rates in the hope that borrowers will vote for them as their lender of choice.

‘The fact that HSBC and Barclays both announced rate cuts for Friday, following Santander, Natwest and Halifax earlier in the week, is a real boost to the mortgage market.’

Ranald Mitchell, director of Charwin Mortgages, takes a more dramatic view of things.

He added: ‘This is not just another rate cut: it is a declaration of war that will hopefully continue for some time.

‘Both lenders are sharpening their strategies, ready to take the lead and outpace the competition.

‘While conflict is rarely celebrated, many homebuyers and mortgage holders hope that this will develop into a full-blown campaign, bringing significant benefits.’

Why are mortgage rates falling?

Mortgage rates are falling due to changing expectations about the future of interest rates. Expectations about market interest rates are reflected in swap rates.

These swaps are influenced by long-term market forecasts for the Bank of England base rate, but also by the broader economy, internal bank targets and competitors’ prices.

As of July 2, the two-year swaps will be 4.48 percent and the five-year swaps will be 3.98 percent.

This is down from a month ago, when two-year swaps were at 4.61 percent and five-year swaps were at 4.05 percent.

Nicholas Mendes, mortgage technical manager at broker John Charcol, believes swaps are not the only factor influencing rate cuts at the moment.

He believes that the lack of activity in the mortgage market is also encouraging lenders to attract new customers.

Mendes expects the tariff war to continue for another two weeks before a quiet period returns.

He said: ‘There have been only slight declines in the swaps market since the general election, but there has been a drop in activity as potential buyers wait in the hope of further government stimulus, such as higher transfer tax thresholds or more options for first-time home buyers.

‘Lenders have also delayed implementing rate cuts to balance the potential volatility of swaps.

‘That’s why lenders have held interest rates longer than they would have liked and are now repricing interest rates now that the election is over.

‘These factors have led to a decline in purchasing and refinancing activity, with lenders trying to make up for lost time by capturing as much market share as possible.

‘Despite the lack of a reduction in bank interest rates, there is room for reductions.

‘We can expect around two weeks of repricing before a pause as lenders adjust their margins to appropriate levels. However, some high street lenders may continue to compete for volume.’