HSBC Sparks Mortgage Price Race

HSBC has opened the year by trimming mortgage rates, becoming the first major UK lender to do so in 2026 — a move that could trigger fierce competition on rates in the coming months. The cuts, covering both owner-occupier and buy-to-let products, take effect on Monday. The decision follows the Bank of England’s December reduction of the base rate to 3.75%. Brokers welcomed the news as a potential boon for households, saying rivals are likely to respond to stay competitive. David Stirling, an independent financial adviser at Mint Wealth, said HSBC’s step looks like a clear signal that lenders may chase market share, and could lead to a scramble among banks to lower prices. With around 1.8 million homeowners due to remortgage this year — many coming off ultra-cheap deals struck before rates began rising in 2021 — timing matters for lots of households. Current market measures show the average two-year fixed residential mortgage sits around 4.83%, while the comparable buy-to-let average is about 4.7%, according to Moneyfacts. Those on variable-rate deals tied to the base rate should already see repayments fall following the Bank’s December cut. But fixed deals are a different story. Nicholas Mendes, mortgage technical manager at broker John Charcol, points out much of the expected future easing has been baked into current fixed-rate offers. That means fixed rates may not track the base rate one-for-one: they could fall more modestly now and even end the year priced a touch above bank rate if markets reassess where rates will settle over the long term. City economists are pencilling in two more base-rate reductions this year, although the Bank of England has warned such decisions will become “a closer call.” The central bank’s December vote to cut was narrowly won, five to four, with Governor Andrew Bailey switching from a hold to a cut. The housing market’s backdrop is mixed. Nationwide reported an unexpected slip in house prices in December and the weakest annual growth in more than 18 months, while industry forecasts suggest new mortgage demand could ease in 2026 even as remortgaging activity rises. What this means for ordinary borrowers is straightforward: a window of opportunity may be opening, especially for those coming off fixed deals. But how wide it becomes will depend on whether other big lenders follow HSBC quickly — and on how much of the BoE’s expected loosening is already priced into the market. --- Managing your business finances? TaxAce provides smart online accountancy services for UK businesses with flexible monthly plans. Image and reporting: https://www.theguardian.com | Read original article