Major lenders could be on the brink of a fresh round of mortgage rate cuts, according to a leading mortgage expert
UKMC founder Sam Fox spoke out after Barclays and NatWest unveiled significant reductions across their mortgage ranges at the end of May.
NatWest cut selected tracker remortgage products by more than half a percentage point, while Barclays lowered its headline two-year fixed rate to 4.39%, currently among the cheapest deals available.
The moves come as swap rates, which underpin mortgage pricing, have fallen sharply in recent weeks, prompting speculation that rival lenders may now be forced to respond to remain competitive during what is traditionally one of the busiest periods of the year for mortgage activity.
For borrowers and brokers, the key question is no longer whether rates are falling, but how many lenders will follow Barclays and NatWest’s lead.
Mr Fox believes competitive pressure is likely to force further repricing across the market.
He said: “Two-year swaps have dropped nearly 20 basis points in a month. Five-year swaps are down about 15. That’s basically the cost of money for lenders, so when it falls that much, they’ve got room to pass it on. Barclays and NatWest have taken that room and run with it. The big question now is whether other lenders can afford not to follow suit.”
The latest reductions have been concentrated in areas where lenders are competing hardest for market share ahead of the summer period.
“NatWest went after remortgage hard. Fifty-four basis points off the tracker at 80% LTV, 52 off the 85%. And Barclays putting a two-year fix at 4.39% means it’s sitting at the top of every broker’s sourcing system. If you’re a mid-tier lender and your rate is half a percent higher, you’re not going to get the calls.”
Mr Fox also pointed to the growing importance of product fees when assessing the true cost of a mortgage deal.
He said: “Leeds Building Society is offering a remortgage at 4.64% with a £1,499 fee, while Barclays is at 4.73% with a £999 fee. When you factor in the upfront costs, Barclays can come out cheaper for many borrowers depending on the loan size.”
With competition intensifying, Fox expects further reductions from lenders currently sitting above the market.
Mr Fox continued: “I’d expect most lenders above 5% on a standard fixed rate to be repricing in the coming days. Brokers are already busier, and lenders always take note when application volumes go up. Nobody wants to be the one losing deals on rate.”
Mr Fox believes some of the most significant developments are taking place in the higher loan-to-value sectors, where affordability remains under pressure for many prospective buyers.
He said: “If you’ve only got a 10% deposit, you’ve been paying through the nose for a while.
NatWest bringing that 90% rate down to 5.35% with £250 cashback actually changes the numbers for people who were stuck. Barclays has done something similar with its three-year fix for 5% deposit buyers, down from 5.85% to 5.42%. On a typical mortgage, those reductions can make a meaningful difference to monthly affordability. When the high street moves on those tiers, the smaller lenders usually follow pretty quickly, because that’s the business they want.”
Not every lender is moving in the same direction. Accord Mortgages increased some rates this week, with certain two-year products rising by as much as 0.17%. Fox believes this is more likely to reflect operational and funding considerations than a broader shift in market expectations.
Looking ahead, he expects the overall direction of travel to remain downward.
Mr Fox said: “Overall, I think most of the market comes down over the next few weeks. Swaps are lower and lenders want the business. I’d be surprised if we don’t see another wave of reductions before the end of June. The lenders currently sitting above the market know they risk becoming invisible to brokers if they don’t respond.”
