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Major mortgage lenders are cutting rates as they enter an end-of-year price war to hit sales targets.
Natwest, Santander and Barclays lowered rates last week despite expectations the Bank of England will hold its benchmark Bank Rate steady during its final decision of the year on Thursday.
Experts said the trend has been triggered by lenders racing to reach their annual sales goals, with lower rates expected to continue into the New Year.
It comes amid an unusually busy December for the property market as buyers rush to complete on sales ahead of Labour’s stamp duty increase in April.
Santander cut rates by up to 0.23pc across more than 70 mortgage deals while Natwest lowered its two-year and five-year products by up to 0.39pc. Barclays cut rates by up to 0.14pc.
TSB has also announced cuts of up to 0.25pc across its fixed rate mortgages coming into effect Tuesday 17 December.
Chris Sykes, director at broker Private Finance said: “Lender targets reset in January so they go strong on pricing to get business early. I know that some lenders have ambitious targets next year targeting market share with rate diversification and criteria, so it is looking positive for next year and hopefully there are no spanners in the works.”
Aaron Strutt at Trinity Financial added: “Rates have been falling in recent weeks and it seems pretty likely that we will get sub-4pc rates in January. The lenders will want to have a busy start to the year and they know they will need to lower rates to tempt borrowers to take their mortgages, especially given the fierce competition between the banks and building societies.
“Two, three and five-year fixes are already edging closer to 4pc which will come as welcome news to those hoping to get on the property ladder.”
Swap rates – the main pricing mechanism for fixed-rate mortgages – have slowly been falling over the past month. The five-year swap rate is now close to 3.8pc with the two-year at around 4.1pc.
Expectations that the Bank Rate will fall have also bolstered market confidence. Bank of England Governor Andrew Bailey this month suggested that the central bank could make four rate cuts next year. The Bank Rate is currently set at 4.75pc.
However, the Monetary Policy Committee is taking a “gradual” approach to rate reductions amid global economic uncertainty and stubborn inflation in the UK.
Inflation increased in October to 2.3pc, away from the central bank’s target of 2pc meaning interest rates will take longer to fall.
Despite most lenders cutting rates, HSBC opted to increase its deals. Only new customers with larger deposits or equity in their properties will benefit from cuts.