Halifax and Leeds Building Society have ignited a fierce battle in the mortgage market by slashing their rates as the new year commences, signalling a potential wave of competition among lenders in 2024.
Halifax, a major player in the lending arena, has taken a significant step by reducing rates on their 2-year fixed mortgages, with a substantial drop of 0.83% from 5.64% to 4.81%. Additionally, they’ve enacted a reduction of 0.92% for those seeking to remortgage.
Simultaneously, Leeds Building Society has made moves on 90 different deals, cutting rates by up to 0.49%, resulting in the most affordable 2-year fixed rate plummeting to 4.6%.
David Hollingworth, an associate director at L&C Mortgages, highlighted the significance of Halifax’s actions, stating, “Being the biggest lender, it’s always worth noting moves from Halifax and should set the tone for the New Year.”
Hollingworth predicts that Halifax’s rate cut is likely just the beginning of a series of reductions, attributing this trend to the drop in swap rates over the festive season. Market sentiment appears convinced that interest rates will be lowered, which is expected to translate into further cuts to fixed rates.
The ability of lenders to offer reduced rates stems from the decline in swap rates, which directly impacts their cost of funding. These rates, tied to Gilt yields from government bonds, reflect market expectations regarding future interest rate movements. Presently, they are on a downward trajectory in anticipation of a base rate cut by the Bank of England in 2024.
The latest data on Consumer Price Index (CPI) inflation indicates a decrease of 0.5%, bringing it down to 4.2% in November. This downward trend suggests a closer alignment with the Bank’s 2% inflation target, potentially influencing the Bank’s decisions around interest rates.
As mortgage giants strategically manoeuvre to offer more competitive rates, borrowers could potentially benefit from a more favourable lending landscape in the coming months.
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