First Direct has taken a bold step, reducing its mortgage rates by up to 0.40 percentage points. This change, effective from Tuesday, marks their most substantial rate drop since February this year. Additionally, they have introduced two new mortgage products for those with a 5% deposit. Their standout offer is a five-year fixed-rate deal at a low rate of 4.74% for borrowers with a 40% deposit.
Halifax’s Competitive Rates
Following suit, Halifax announced reductions in its mortgage rates by up to 0.46 percentage points starting Wednesday. Notably, they’ve slashed the rate on a five-year fix for borrowers with a 10% deposit by 0.24 percentage points, bringing it down to 4.97%. They also offer a five-year fix at 4.53% for those with a 40% deposit, both accompanied by a £999 fee.
The Broader Market Trend
The market has been witnessing five-year fixed products below 5% for some time, but now these rates are comfortably settling even lower. HSBC UK is also anticipated to join this trend with its rate reductions.
Implications for Borrowers and Investors
Enhanced Accessibility for First-Time Buyers
Liam O’Hara, head of mortgages at First Direct, highlights their commitment to making mortgages more accessible, especially for first-time buyers with smaller deposits. Their new 95% LTV (loan-to-value) products aim to assist those entering the property ladder.
Market Responses and Predictions
Industry experts view these rate cuts as a positive shift. Lewis Shaw from Shaw Financial Services sees Halifax’s move as a potential market stimulator. Simon Gammon of Knight Frank Finance believes that we may have passed the peak of mortgage rates, moving towards more manageable levels despite being higher than historical averages.
Current Mortgage Rate Landscape
According to Moneyfacts, the average two-year fixed homeowner mortgage rate was 6.21% as of Tuesday morning, slightly down from 6.22% on Monday. Similarly, the five-year fixed rate was 5.80%, a minor decrease from 5.81% the previous day. These figures reflect a broader trend of gradually declining mortgage rates.
Key Takeaways for Property Investors
- Opportune Time for Investment: The recent cuts make it an opportune time for investing in property, with more affordable financing options.
- Increased Lender Competition: As lenders compete with lower rates, investors should stay informed about the best available deals.
- Potential for Further Cuts: With major players like Halifax and First Direct leading the way, other lenders might follow, potentially offering even more attractive rates.
- Long-Term Outlook: While rates are lower, they remain higher than past averages. Investors should consider long-term financial planning and market trends.