Mortgage Rates Fall, But Fixed-Rate Borrowers Face Waiting Game

Mortgage Rates Fall Following Base Rate Cut

The Co-operative Bank and TSB have become the latest lenders to reduce their tracker and standard variable rates, following similar moves by Santander and Yorkshire Building Society last week. This comes after the Monetary Policy Committee's decision to cut the Bank of England base rate from 4.75% to 4.5%.

The rate cut is expected to provide some relief to borrowers, with Laura Suter, director of personal finance at A J Bell, estimating that someone with a £125,000 mortgage could see their monthly payments fall by £18, while someone with a £400,000 mortgage could save £58 per month.

The Co-operative Bank has reduced its standard variable rate by 0.25%, while TSB has cut some of its residential and landlord variable rates. TSB has also lowered its homeowner variable rates to 7.99% and buy-to-let variable rates to 8.84%.

However, Suter warns that those on fixed-rate mortgages may not see immediate benefits. She notes that two-year fixed rates are currently higher than they were in November 2022 and only slightly lower than in February 2023, despite two base rate cuts since then. Five-year fixed rates are also higher than they were two years ago.

The higher mortgage rates are attributed to turmoil in the bond markets, which has led to increased government bond yields. This, in turn, has raised borrowing costs for banks and subsequently impacted mortgage rates.