Sub-5% mortgage deals will be on the market within weeks as hopes grow that interest rates are nearing their peak, mortgage brokers say.
Falling expectations for future borrowing costs mean home buyers may be able to get five-year fixes at 4.5% by the end of October, as more and more lenders announce rate cuts.
The Bank of England is poised to announce what is expected to be its 15th consecutive interest rate rise on September 21, bringing the Bank Rate up to 5.5%, up from 0.1% at the end of 2021.
But increasing signs that the labour market is turning, coupled with weaker than expected July GDP data, mean that markets now expect this to be the peak in rates, according to the Telegraph.
By contrast, two weeks ago, markets had priced in a Bank Rate peak at 5.75%.
Nick Mendes, of mortgage broker John Charcol, said this drop is likely to bring fresh price cuts on fixed-rate deals in the coming weeks.
He said: “Markets have reacted favourably to early indications that September could see a hold or the last 0.25 percentage point increase. As a result of the latest trend and current market pricing, I suspect we will see the likes of HSBC, Barclays, Halifax and NatWest break the 5% barrier in the next fortnight.”
He added: “We could see market-leading rates around 4.5% on a five-year fix by the end of October.”
A flurry of lenders have announced new rate cuts. Barclays said on Thursday that it was “taking advantage of recent falls in the cost of market funds” and would make further cuts to a selection of its fixed rates on Friday. The changes include reducing the rate on its five-year fix for a buyer with a 40% deposit from 5.37% to 5.27%.
Virgin Money and Clydesdale Bank also announced they would make cuts to fixed rates of around 0.1 percentage points from Friday.
The Mortgage Works, Nationwide’s buy-to-let arm, cut rates on selected buy-to-let deals by up to 0.5 percentage points on Thursday.