HSBC, Barclays, Lloyds: Lenders bank on interest rate cut as mortgage ‘price war’ heats up

Top UK lenders are offering more mortgages to prospective house buyers, the Bank of England has revealed, as falling interest rates stir up a “price war” on the high street. 

The Bank’s credit conditions survey revealed that the burgeoning supply of mortgages would come against a levelling off in demand in the three months to May. 

More homeowners are also expected to remortgage as homeowners rapidly respond to the Bank’s rate-cutting, which could yet accelerate over the coming months. 

A large increase in remortgaging was seen in the three months to December.

The survey comes as Barclays became the first FTSE 100 bank to drop rates after reducing two- and five-year fixed deals to 3.99 per cent. 

This followed TSB, Coventry Building Society, Bank of Ireland and Co-op Bank all trimming rates.

Brokers predicted the fall in borrowing costs would see banks scale up competitiveness. 

Emma Jones, managing director at Whenthebanksaysno said: “More lenders are now following the initial rate cuts that we saw last week and it’s starting to feel like we could have a price war through the summer months.”

HSBC slashed a flurry of rates across its residential and buy-to-let mortgage ranges, as well as a new sub four per cent five-year fixed rates. 

Lloyds Banking Group, which covers Halifax, Bank of Scotland and Lloyds Bank, has eased its affordability calculations, enabling an extra £38,000 for borrowing.

HSBC also slashed a flurry of rates across its residential and buy-to-let mortgage ranges, as well as a new sub four per cent five-year fixed rates. 

Two-year fixed rates have reduced by 0.42 per cent to 4.81 per in the last year, according to data from Rightmove. Five-year fixed rates were down 0.13 per cent to 4.70 per cent. 

Interest rate cuts anticipated

Markets widely expect that the Bank will cut interest rates at least three times this year as President Trump’s tariffs could have a deflationary effect on price growth in the UK. 

The Bank of England held rates at 4.5 per cent in March. This compares to a previous peak of 5.25 per cent last year. Brokers have eyed further cuts in the coming months.  

David Stirling, director at Mint Mortgage & Protection, said: “It now feels like only a matter of time before other major lenders like Nationwide and Halifax are compelled to respond and sharpen their pencils. 

“With a Bank of England rate cut looking increasingly inevitable, the outlook for borrowers is, at least for now, decidedly positive.”

 Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), told the Treasury Committee last month that lenders were “too cautious” in mortgage stress tests.

He added the FCA was looking into changes that could be made to the regulation of mortgage lending in order to boost home ownership.

Stress test rules were originally introduced by the FCA to avoid any repetition of the financial crisis. The tests helped protect borrowers from the sharp rise in mortgage rates that began at the end of 2021.

Paul Matthews, a director at the financial services consultancy Broadstone suggested the Labour government would be pleased about lenders loosening mortgage availability.

“It marks a hat-trick of economic good news for the Government in the past seven days after inflation fell more than expected this week and the economy expanded faster than anticipated last week,” he said. 

“As rates fall, the loosening of credit conditions could boost economic activity by encouraging investment and consumption but it must be noted that the economy remains in a precarious situation.

“Household confidence will be key to taking advantage of this increasing supply of credit but remains shaky and could be de-railed should the ongoing global negotiations on trade tariffs result in further market turbulence.”