In the rapidly shifting landscape of mortgage rates, staying informed about the latest developments is essential for borrowers. Recently, Coventry Building Society and MPowered Mortgages have joined the ranks of major lenders reducing their fixed-rate offerings. To delve deeper into this trend, I engaged in an insightful conversation with Richard Hammond, a mortgage advisor at Homewise Financial Solutions.
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“The market is incredibly competitive right now,” Richard began. “With the Bank of England maintaining the Bank Rate at 5% and the anticipation of future cuts, lenders are striving to present the most appealing deals to potential borrowers.” Indeed, Coventry Building Society and MPowered Mortgages have enacted notable reductions. Coventry has decreased selected fixed rates for residential borrowers by up to 0.19 percentage points and has also lowered rates for buy-to-let customers by up to 0.45 percentage points. MPowered Mortgages has followed suit, slashing rates across its range by up to 0.5 percentage points.
These rate reductions are certainly advantageous for borrowers. For instance, Coventry offers a highly competitive two-year fixed rate for purchase at 5.15% with a £999 fee for those with a 10% cash deposit (90% LTV). Equally appealing is their five-year fixed rate for remortgage at 4.52% with a £1,999 fee at 75% LTV. MPowered Mortgages’ new fixed-rate deals, effective from 7 September, are poised to further stimulate competition. “When lenders like MPowered cut their rates, it often triggers a domino effect, prompting others to follow suit, resulting in a more borrower-friendly market,” Richard explained.
To provide a more comprehensive view, Richard compared these new deals with current offerings from other lenders. “Santander, for example, recently reduced the cost of selected fixed rates for new customers by up to 0.27 percentage points. Their five-year residential ‘fix and switch’ product at 4.93% with no fee up to 80% LTV is noteworthy.” Additionally, Virgin Money and Leeds Building Society have also made reductions. Virgin’s five-year residential ‘fix and switch’ at 5.44% at 90% LTV and Leeds’ selected residential mortgage deals lowered by up to 0.16 percentage points are significant changes worth noting.
Looking ahead, the market’s future hinges on upcoming key decisions. With the Bank of England’s next decision on the Bank Rate set for 19 September, there is considerable speculation about further rate cuts. Richard highlighted that the US Federal Reserve’s decision on 18 September could heavily influence the Bank of England’s move. “Experts are already predicting a possible reduction in US interest rates by half a percentage point due to weaker-than-expected jobs data,” he said. Richard Carter, head of fixed interest research at Quilter Cheviot, is among those anticipating a potential 50 basis points cut by the Fed. This expectation is fuelling the current trend of lenders preemptively reducing fixed-rate deals to remain competitive.
In light of these developments, Richard offered practical advice for borrowers. “First and foremost, it’s crucial to shop around and compare deals,” he emphasised. “With so many lenders adjusting their rates, substantial savings can be found by selecting the right product.” He also advised considering long-term plans. “If you’re planning to stay in your property for a considerable time, locking in a low fixed rate now might be prudent. However, if you anticipate changes in your circumstances, a shorter-term deal or one with more flexibility might be more suitable.”
The recent trend of fixed-rate reductions by major lenders such as Coventry Building Society and MPowered Mortgages underscores the importance of staying informed and proactive in the mortgage market. As Richard Hammond noted, the competitive landscape presents potential savings for borrowers but necessitates careful comparison and consideration of individual financial circumstances. For those navigating the mortgage market, now presents an opportune moment to reassess options and secure a deal that best aligns with one’s needs.
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