HSBC Cuts Rates: Is The Rollback Gathering Pace?

Any decrease in rate is a positive step, especially considering the current market uncertainties. However, it seems like the mortgage market is in a state of limbo. As rates pull back we keep on asking how low can they go but with the current economic backdrop, we know they will not go low enough to kick-start this market. I let my family go on holiday this week while I stayed back to hold down the fort. Considering how things are going, I might have been better off joining them.

No one could have predicted the ferocity of the fight for market share, and with HSBC announcing another round of rate cuts, others will certainly follow. The acid test will be lender pricing behaviour when the Bank of England inevitably increase the base rate. With mortgage interest dropping, and base rate increasing, we have two antagonistic inflationary forces.

Rate reductions are always welcome and I think the last couple of weeks has helped to settle the nerves of home buyers and sellers alike. I don't think we're suddenly going to see the market return to activity levels seen pre-last year's mini-budget anytime soon but if rates continue to fall and the Bank of England can hold its nerve next month and not raise rates for a 15th time in a row then we may see confidence flow back in for the later half of of the year. It's clear lenders want to lend with these recent rate cuts, the government and the BoE need to join the party as well.

Again, commendable but no rate reduction figures mentioned as yet, unlike many other lenders with rate reduction announcements - do feel at present The Big 6 Lenders are sharing out provisions while they can in preparation for hunkering down possibly in 2-4 weeks time. 5yr SWAP rates have increased 0.3 bps in the last three weeks alone, and if this trend continues then can see any further rate reductions, being minimised. Lenders are only bringing down the rates in line with the increases they incorporated in July,, so let's not get too excited, and let loose the party poppers just yet.

These rate reductions are very welcome, and will likely see other lenders also re-price to keep in line and meet their lending targets. The Buy to Let reductions are particularly of relief as this has such an impact on the borrowing ability of the stress-testing, and also calm the level of rent increases landlords will have to pass on to their tenants.

If the last few months have taught us anything is that rate offerings are not around for long so if you like the look of a deal today, ensure you secure the rate now rather than miss out. It is positive to see that rate reductions are being passed back to the clients when they are available but we need to see lower 2-year deals available as most clients do not want to commit to 5 years at the moment where most of the savings are.