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Homeowners who are preparing for the expiration of their two-year fixed mortgage agreements may potentially save thousands of pounds in increased interest payments, as major lenders have started the new year by reducing their rates.
The Bank of England’s base rate has rapidly increased over the past two years, going from historically low rates to its current 15-year high of 5.25 percent. This has caused concern for many homeowners who are approaching the end of their fixed-rate deals and need to renegotiate this year.
However, due to increased competition among lenders in a sluggish market and the possibility of multiple cuts to the Bank of England’s base rate this year, Halifax, the largest lender in Britain, initiated 2024 by decreasing its fixed mortgage rates by almost 1 percent on Tuesday.
Halifax has reduced its interest rates for its two-year, five-year, and 10-year fixed deals by as much as 0.83%. Additionally, the bank has lowered rates by up to 0.92% for its current customers.
According to Moneyfacts, Halifax currently offers the most affordable two-year option for homeowners with at least 40% equity in their property. This deal has an interest rate of 4.68% and a fee of £999, which is significantly lower than the average rate of 5.93% for two-year fixed deals in the overall market.
The building society has decreased their two-year fixed deals by 0.83 per cent, going from 5.64 to 4.81 per cent. This would result in a decrease of £122 per month on a 25-year mortgage for a property worth £250,000, bringing the monthly repayment down from £1,556 to £1,434. This change would save homeowners £1,464 annually.
Leeds Building Society has reduced interest rates on its mortgage offers by as much as 0.49%, with their most affordable two-year fixed rate now at 4.6%.
Following a decrease in inflation to 3.9% in November, the Bank of England is facing increasing pressure to begin reducing interest rates due to the slowdown of both the economy and housing market.
According to the Yorkshire Building Society, the amount of individuals becoming new homeowners with a mortgage decreased from a 20-year peak in 2021 to a 10-year low in 2023.
The decrease in the rate of price increases, which was larger than anticipated, falls short of Prime Minister Rishi Sunak’s goal of reducing inflation from 10 to 5 percent by the end of 2023. As a result, there is growing speculation that the mortgage market will continue to decline, especially with the Bank of England’s decision to maintain its base rate at 5.25 for the third month in a row.
According to Riz Malik, a representative from R3 Mortgages, lenders are anticipated to aggressively compete in January as they try to gain a larger portion of the market after a lackluster year in 2023.
According to recent data from Yorkshire Building Society, there has been a significant decrease in the number of first-time homebuyers obtaining mortgages. This number, which peaked at over 400,000 in 2021, has now dropped by 20% to just 290,000 in the span of two years, reaching a 10-year low.
“In January, there will be a more intense competition for business and these individuals will be more competitive,” stated Mr. Malik. He also added, “It may take the first quarter for people to really get started, but we’re already noticing signs of improvement – an increase in inquiries from first-time buyers, particularly in areas where rent prices have significantly risen throughout the year.”
However, prominent economists also cautioned last month that individuals with mortgages who are transitioning from fixed rate agreements made two years ago will encounter “a significantly altered landscape”. Additionally, the UK’s decelerating economy and increased mortgage expenses indicate that quality of life will continue to be “fairly dire”.
Source: independent.co.uk
