Mortgage rates often rise in tandem with the base rate, but an improving outlook for inflation has given lenders the confidence to make cuts.

Better times lie ahead for UK mortgage borrowers.

After weeks of surging mortgage rates, the market stabilised in July after official figures showed inflation had started to fall meaningfully, albeit slowly. The smaller, niche lenders began making cuts first, which then spread to the larger institutions. NatWest, Halifax and Virgin Money have all made reductions to their ranges this week.

The mortgage market should absorb today’s decision by the Bank of England to raise the base rate to 5.25%, largely because the price of mortgages is heavily influenced by how high the base rate will need to rise during the months ahead. Until late July, investors were betting the base rate would rise as high as 6.5% early next year. It now looks likely that we’ll see a peak of around 5.5% to 5.75% later this year.

That should give lenders scope to make more, gradual cuts to mortgage rates, barring any nasty surprises from the coming months’ inflation figures.

News that mortgages rates are falling has prompted a rapid shift in behaviour from borrowers. Many are now opting to take tracker rates, often with a view to fixing once rates ease further. There are risks to this approach. Inflation and interest rates have surprised on the upside consistently for the past two years, so what’s right for you will depend on your circumstances.

We’ve seen less movement in mortgage rates from the private lenders. These institutions tend to be less reactive both when rates rise and fall, but the decline in swap rates has given prime borrowers more potential to secure a better rate when fixing. There is considerable competition for business in these markets, particularly when clients may utilise alternative services like asset management and investment banking.

If you are looking to purchase a property, refinance, or have a client you think we could help, please get in touch. We have access to more than 200 lenders and can offer a comprehensive overview of the options.