But before you get too excited for your clients….
When the Old Lady of Threadneedle Street did us all a favour last week by reducing rates, we were all hoping the cut would start a chain reaction – and soon.
Well, there have been a number of swift moves in the rates department. In response to the Bank of England’s recent decision to lower the base interest rate, numerous high street banks and building societies have reacted quickly and made their own cuts – to savings rates. Within days of the central bank’s move to cut the base rate to 4.5% last Thursday, almost 40 financial institutions had made adjustments affecting savers across the UK. Borrowers? Not so much yet – although there are one or two early starters in the mortgage cut department.
Chase Bank informed its customers on Monday that its gross annual rate for its saver account would drop from 3.45% to 2.96% over the course of the week starting today. Meanwhile, Barclays announced changes to two of its savings products, effective Thursday. The rate for its Everyday Saver account will decrease from 1.50% to 1.25% on balances up to £10,000, while the Rainy Day Saver will see a reduction from 5% to 4.76% for amounts below £5,000.
These cuts mark the first changes to Barclays’ savings rates since September 2023.
Tim Hogg, director at consumer advocacy group Fairer Finance, told the Financial Times that rate reductions were an inevitable consequence of the BoE’s decision. “Banks were bound to pass these cuts on to consumers,” he explained. However, he acknowledged consumer frustration, adding, “This can leave a bitter taste in the mouths of consumers who feel they didn’t benefit as quickly when base rates rose, but ultimately, it’s how the banking sector works.”
The good news
While savers face declining returns, prospective homebuyers have received some positive news following the BoE rate cut. Barclays and Santander have announced new mortgage deals with rates dipping below 4% for the first time since November. These offerings are available to borrowers with a loan-to-value (LTV) ratio of 60%.
Read more: Bank of England should have made bigger interest rate cut - official
Unlike savings rates, fixed mortgage rates do not track the BoE base rate as closely, as they are influenced by swap rates - financial instruments used by lenders to set borrowing costs. Since mid-January, average two-year fixed mortgage rates have hovered around 5.50%.
As we reported yesterday, major mortgage lender Barclays has introduced several rate cuts across its mortgage products, including a new five-year fixed residential purchase mortgage at 3.99%, subject to a £899 product fee and 60% LTV. Similarly, Santander recently became the first major UK bank this year to offer sub-4% mortgage rates, unveiling two- and five-year fixed-rate products at 3.99% for homebuyers and remortgagors with 60% LTV.
Other lenders have followed suit. Halifax Intermediaries has launched 1.5-year fixed remortgage products with conveyancing services included, while also increasing tracker rates by up to 0.18%. Meanwhile, NatWest has adjusted rates across multiple mortgage products, with reductions of up to 36 basis points on remortgages and up to 16 basis points on home purchases, including its high-value and green mortgage offerings.
Read more: Mortgage rates to be cut by another 0.67%
TSB has reintroduced its five-year fixed First-Time Buyer and Home Mover products at 90-95% LTV, with rates starting at 5.39% and a £500 cashback incentive. The bank has also implemented reductions of up to 10 basis points on two-year fixed mortgages for first-time buyers and home movers at LTVs up to 75%, as well as a 10 basis-point decrease for those at 90-95% LTV. Additionally, two-year fixed remortgages up to 75% LTV have been reduced by up to 0.15%, while five-year fixed remortgage rates have been cut by 0.10%. Following the BoE’s rate decision, TSB has also lowered its tracker rates for new customers by 25 basis points.
In the specialist lending sector, several providers have also introduced rate cuts. Landbay has reduced rates by up to 30 basis points across its portfolio, with its five-year fixed-rate mortgage for small HMOs (houses in multiple occupation) and MUFBs (multi-unit freehold blocks) now starting at 5.04% for 75% LTV. The company has also adjusted its limited-edition range, including AVM-supported products, with standard five-year fixed rates beginning at 4.69%.
Fleet Mortgages, which specialises in buy-to-let lending, has cut rates by up to 25 basis points on its five-year fixed HMO and MUFB products. Its 65% LTV five-year fixed rate now stands at 5.59%, while its 75% LTV five-year fixed rate with a 3% fee has been reduced to 5.39%. The lender’s zero-fee 75% LTV five-year fixed rate has also been lowered to 5.89%.
Overall, while savers are seeing reduced returns on their deposits, our clients are hoping that the steady trickle of mortgage rate cuts becomes a flood – and sooner rather than later.
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