Halifax will slash fixed mortgage rates despite base rate increase | Personal Finance | Finance

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Halifax will be reducing interest rates on a number of its fixed mortgage products – some even by as much as 71 percent.

The new rates will go live on Friday, August 11 and will cover its first-time buyer, new build, large loans and shared equity products.

The move will see Halifax join its rival lenders, such as HSBC and TSB, which have already reduced selected rates after the latest Bank of England Base Rate hike to 5.25 percent last week.

Highlights among the range will include a new five-year deal at 5.28 percent, which reflects a 71 percent drop, as well as a two-year fixed rate at 6.18 percent (reduced by 27 percent).

Mortgage brokers have described the market as becoming almost “surreal”, as, despite the recent Base Rate increase – which would typically see mortgage products go the same way – fixed rates are falling.

Riz Malik, director of a Southend-on-Sea-based independent mortgage broker, R3 Mortgages, wrote on newspage.media: “With Halifax, the UK’s largest residential lender, adjusting its prices downwards alongside HSBC and TSB, it signals to the market that even following a Base Rate increase, fixed rates can drop. In that regard, the mortgage market has become almost surreal.”

He added: “August might emerge as the most favourable month for mortgage rates this year.”

Lewis Shaw, the founder of Mansfield-based Shaw Financial Services, weighed in: “After the rate reductions by HSBC and TSB, Halifax now wants in on the action, which can only be positive.”

Mr Shaw said that, while rate reductions come as a “welcome relief”, this could be the start of a “price war” as transaction volumes drop and mortgage lenders need to get the sharp elbows out to hit their targets.”

Rob Gill, managing director at mortgage broker Altura Mortgage Finance, echoed the sentiment, saying: “All eyes will now be on next week’s inflation figure, due on August 16.

“If this confirms a further fall in inflation, a mortgage price war in September cannot be ruled out as lenders seek to make up for a quiet July and August.”

Ian Middlemass, head of operations at Chester-le-Street-based PIA Financial Solutions, added: “It’s interesting to see Halifax making these updates to their product offerings, particularly the noticeable cuts in their five-year fixed rate options. This move certainly reflects the shifting dynamics in the mortgage market.”

The Bank of England has raised its Base Rate 14 times consecutively since December 2021 to help temper the UK’s spiralling inflation rate. With news that the pace of price increases marginally dropped from 8.7 percent to 7.9 percent in the year to July, the growth in Swap rates has also started to fall.

Mortgage market Swap rates are the price lenders have to pay financial institutions when securing fixed rate funds and have to be large enough to mitigate any risk associated with offering fixed rate mortgages.

According to specialist property lending experts at Octane Capital, these are generally based on Gilt yields, which reflect what the market anticipates will happen with regard to interest rates further down the line. While Swap rates increased at an average monthly rate of 18 percent per month in 2022, this average monthly rate slowed to just nine percent per month in July.

Nationwide, HSBC, TSB, and first direct are among other major lenders to cut rates this week.

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