HSBC cuts rates across residential range

The latest mortgage rate reduction announcement this morning from one of the big six lenders in HSBC, will send a small shockwave to the rest of the market. All other high street lenders will be cautiously watching from afar thinking what their next step should, and will now be. Following the announcement from Accord to reduce their residential rate offerings just yesterday, today's news from HSBC spells further good news for homeowners. It is certainly a step in the right direction for nervous borrowers who have hidden behind their sofas watching rates spiral seemingly out of control for the last three to four months. This could well signal the start of a new period of competition in the market where lenders fight for market share, not wanting to be left behind. Homeowners nearing the end of their current fixed rates will now be watching the rates with much more optimism and now a faint expectation, rather than hope, that mortgage rates are set to do a U-turn for the better.

I think it's safe to say this could be the start of another rate war, similar to the one we saw early this year after the disaster that was the mini-Budget. This is fantastic news for homeowners, after months of emails from lenders only sending rates one way. To finally have some positive news is great for borrowers. As we have seen other lenders reduce their rates over the past week, now that the high street lenders are involved I do believe we will see more of this. They may not fall rapidly, as this could also shake the market, but a reduction at a time when people are worried about mortgage payments is a step in the right direction.

The reduction of fixed-rate mortgages from HSBC should serve as some relief for borrowers. However, further cuts will be heavily dependent on the next few CPI inflation prints. Borrowers shouldn't be so quick to call victory just yet as there are still a number of challenging obstacles for inflation to navigate before it can achieve its 2% target. The core elements of CPI, such as services, barely budged in June. If this continues to prove sticky, it could end up dimming the light at the end of the tunnel. As such, borrowers aren't out of the woods quite yet, and further evidence of cooling inflation will be required before confidence can be restored in an already fragile housing market.

HSBC leads the way, alongside Accord, with these rate reductions. This is a huge opportunity for lenders to demonstrate that they are not purely focused on profiteering during a difficult time for mortgage borrowers. When interest rate rises are announced, we are flooded with product withdrawal emails from lenders. But when there is positive news, such as the June inflation figure, you could hear a pin drop. I would really like to see more lenders follow the same approach. Will that happen? I think it will take more before we see significant reductions across the market. I hope they prove me wrong.

It's refreshing to see rate reductions. HSBC has followed Accord and we fully expect more lenders to follow suit. I wouldn't be surprised to see another five lenders reduce their rates this week. However, we need to see a much lower drop in inflation for rates to reduce significantly.

It's truly great news to see some High Street lenders reducing their rate offerings based on the positive market feeling now in relation to inflation and what the Bank of England will do in the next meeting. It's humorous, however, to see that some High Street lenders are still increasing their fixed rates and it just shows how out of touch some financial institutions are with public sentiment and strained household budgets. As we have stated before, we think that UK fixed rates for the past six weeks have been overcooked and it will be good to see some normality returning to the mortgage market. It's clear that as rates start reducing, locking into a rate up to six months in advance could be a good move if there is the slightest possibility of a downturn occurring between now and then. A decent financial advice firm will track any new deals coming to market and make sure that you are reserved on the best rate before the account change takes place.

These reductions will come as a huge relief to thousands of mortgage holders who will have had sleepless nights in recent weeks over the fear of how high rates could go. HSBC are the biggest lender to reduce rates so far and hopefully should fuel more of the big 6 lenders to follow suit in the days and weeks to come. However, mortgage holders will still need to be mindful that the rates on offer will likely be more expensive than they have become accustomed to in recent years. They would be prudent not to assume they should hold off so rates can come down further as we have seen twice in the past 12 months that rates can swing the other way at a drop of a hat.

With UK swap rates drifting lower, and the outlook for inflation suddenly looking much brighter, it's no surprise to see lenders breaking ranks and cutting rates. This is great news for mortgage borrowers and it's likely we'll see other high street lenders reducing their fixed rate deals in response.

While smaller lenders started cutting rates last week, we're now seeing larger lenders such as Accord, the intermediary arm of Yorkshire Building Society, and HSBC join the fray with significant rate cuts. This follows the above-expected fall in inflation last week, which has seen money market rates drop significantly. With inflation improving, the cost of funds falling and two major lenders pricing accordingly, it's likely other lenders will follow suit before too long.

In a market starved for new mortgage business, expect other high street lenders to match HSBC's recent rate cuts. Competing on price is the game now.