Several big-name lenders have cut their fixed mortgage rates since the start of the year, providing a glimmer of hope to those facing a sharp jump in the cost of their payments when their current deals end.


There are now a number of five-year fixed rate mortgage deals available below 4%, two percentage points lower than the average 6% five-year fixed rate back seen in October last year. HSBC, Halifax, Barclays and Santander are among those who have cut their rates in recent days, sometimes by as much as half a percentage point.

Alex Hasty, director at Compare the Market said: “For those looking to move home or remortgage, comparing available deals now and staying aware of what is happening in the market could help you prepare and save for the future.”

Fixed mortgage rates are determined by what are known as ‘swap rates’ rather than being directly linked to movements in the Bank of England base rate. Lenders use swap rates to price their products as they are based on what the markets think future interest rates will look like.

Kellie Steed, mortgage expert at Uswitch, said: "Mortgage lenders are divided this week, as an increase in swap rates seems to have caused some lenders to reprice their recently reduced deals, whereas others are either holding fast with the rates announced in the previous weeks, or even making further reductions.

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"HSBC, for example, has committed to cut prices across some of their two, three and five-year fixed rate deals for both product transfers (including those wanting to increase their borrowing) as well as new customers. Co-op, on the other hand, pulled some of their recently reduced rates - mostly those below 4% - and are repricing them to take into account recently fluctuating swap rates.”

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Swap rates are likely to remain volatile following this week’s announcement of an unexpected increase in inflation, which rose to 4% in the 12 months to December. When inflation is high, interest rates tend to remain high too, as this makes it more expensive for people to borrow, resulting in them spending less, which in turn leads to prices increasing more slowly.

That means if you do spot a mortgage deal you like, you may want to act quickly to secure it.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said; “The expectation of lower inflation figures is factored into the mortgage market. It means we’ve seen some chunky cuts – including the high street giants. The average two-year rate has now dropped to 5.62%, according to Moneyfacts - a full percentage point lower than it was four months ago. Even the big lenders are offering rates below 4%. This surprise rise in inflation could mean we get a pause in the cuts, and there’s a chance some of the better deals could go sooner rather than later, so if you are in the market for a fix, it’s worth acting as soon as it makes sense for you."

Most lenders will allow you to sign up for your next mortgage deal up to six months before your current deal ends. The main benefit of this is that if mortgage rates go up, you’ll have already got a competitive rate in the bag, and if rates go down, you still have time to take advantage of lower rates.


Alice Haine, personal finance analyst at DIY investment platform Bestinvest, said: “Existing mortgage holders have up to six months to nail down a fresh deal, with those that lock in an offer able request a better deal with their lender right up until two weeks before the new term starts, making it imperative to track mortgage rates throughout that six-month period.”