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Mortgage rate cutting trend slows as lenders await base rate decision – Rightmove

  • 26/04/2023
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Mortgage rate cutting trend slows as lenders await base rate decision – Rightmove
Average mortgage rates continued to fall this week, but unrelenting inflation has left lenders waiting for the Bank of England’s next move to make major changes, a property portal firm has suggested.

The Rightmove weekly mortgage tracker showed that the largest rate cut was a 0.04 per cent reduction on the average two-year fixed deal at 90 per cent loan to value (LTV) which has fallen to 5.04 per cent.  

The five-year fixed alternative has dropped by 0.02 per cent on average since last week to 4.67 per cent. 

The average rate for a two-year fix at 95 per cent LTV was flat at 5.48 per cent, while the five-year fixed alternative rose by 0.06 per cent to 5.1 per cent. 

There were smaller movements at low LTV tiers, the report noted. 

The average rate of a two-year fixed mortgage at 85 per cent LTV fell by 0.02 per cent to 4.81 per cent, and the average rate for the five-year fixed alternative declined by 0.01 per cent to 4.45 per cent. 

At 75 per cent LTV, rate cuts of 0.02 per cent across both two and five-year fixes saw the average pricing fall to 4.54 per cent and 4.23 per cent respectively. 

Similarly, at 60 per cent LTV, reductions of 0.01 per cent made to both two and five-year fixes saw average rates come to 4.45 per cent and 4.12 per cent respectively. 

These moderate rate cuts follow the latest inflation figures from last week, which showed that the measure had fallen by 0.3 per cent to 10.1 per cent in March. This puts inflation significantly above the Bank of England’s target of two per cent and has left markets wondering if the base rate could rise to five per cent, higher than the originally predicted 4.5 per cent. 

The Bank of England’s Monetary Policy Committee will announce its decision on 11 May. 


The inflation impact 

Matt Smith, mortgage expert at Rightmove, said: “Despite the challenges posed by the unexpected news that inflation remains stubbornly high, which is impacting the underlying funding costs of fixed rate mortgages, the resilience of lenders and desire to compete for business has seen average rates for mortgage products continue to fall this week across most loan to value (LTV) ranges, albeit at a much slower rate. 

“Competition between lenders remains strongest in the traditional first-time buyer LTV ranges. The biggest fall is in the 90 per cent LTV two-year fixed rate product range, which has dropped by 0.4 per cent this week.” 

Smith added: “However, there are signs that lenders are facing increasing pricing pressures, as we have seen an increase in 95 per cent LTV five-year fixed rates. This is in part due to the relatively small number of lenders active in this space, which means that the average can be influenced by one or two lenders increasing rates. 

“Looking forward, it is likely that we will see lenders continue to try to hold the line on rates as competition remains the focus while they await the next base rate decision on 11 May. Despite this, we could see some rate increases in the meantime.” 

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