By Chris Dorrell
Nationwide and TSB joined HSBC in reducing rates on a range of mortgage products today, as rates on mortgages continued to come down after last week’s inflation reading.
Nationwide announced that it would be reducing fixed rates by up to 0.35 per cent while it would reduce rates available on its tracker products by 0.2 per cent.
TSB too announced significant cuts in its offers, including a hefty 0.55 per cent cut to its two-year fixed deal.
The moves followed HSBC’s decision to reduce rates on many of its products yesterday, cutting rates by 0.15 per cent on average across its residential range.
Smaller lenders such as Nottingham Building Society and Skipton Building Society also cut rates.
The average rates available on a two-year deal came down to 6.83 per cent today, from 6.86 per cent yesterday. Average rates on a fixed-rate deal meanwhile fell to 6.34 per cent, down from 6.36 per cent yesterday.
Falling rates came despite a likely rate hike from the Bank of England next week. Riz Malik, director at R3 Mortgages, said “despite the anticipated base rate hike next week, there seems to be a newfound tranquillity in the rate landscape”.
Mortgage rates spiralled in recent months as inflation has remained stubbornly above the Bank of England’s target, forcing it to raise rates. Before last week’s reading, some traders had expected the Bank’s base rate to peak at over 6.5 per cent.
However, data out earlier this month showed a faster-than-expected fall, raising hopes that interest rates would not have to rise as high as previously expected. Most now expect the base rate to peak at 5.75 per cent.
Chris Sykes at Private Finance noted that mortgage rates had moved in response to the inflation figures, but suggested there were still questions about the path inflation would take.
“The inflation data was quick to lighten the dark mood and revise expectations of the market dynamics over the coming weeks,” he said.
“As inflation is now expected to decrease, the question arises: are markets too optimistic in their assessment of July’s economic data? Could it be premature to assume that swaps will remain stable and soon begin to decline further?” he asked.
