Lenders' repricing receives a mixed response
In what’s fast beginning to feel like déjà vu, HSBC UK has announced its third rate cut in just two weeks, and its second within a matter of days – and Nationwide has followed suit, with its own set of further cuts. All of this, you might think, will be encouraging for those homebuyers who have struggled to get onto or to scale the property ladder, but it’s suggested, too, that this may not be good for a sense of stability in the market.
Within HSBC’s UK residential existing customer switching / borrowing more products, its two-year fixed fee saver, two-year fixed standard, three-year fixed fee saver, three- and five-year fixed standard, its five-year fixed fee saver, two- and five- year fixed premier exclusive will see various decreases at 60% LTV and above. There are also decreases within its UK residential first-time buyer / home mover range: Its two-year fixed fee saver, two-year fixed standard, two- and five- year fixed high value mortgages, five-year fixed fee saver, five-year fixed standard, two-year fixed premier exclusive and five-year fixed premier exclusive will see various decreases at 60% LTV and above.
Further reductions will also be seen within HSBC’s first-time buyer / home mover energy efficient home range, and its UK residential remortgage, among other changes. All revisions will be effective from this Friday.
According to industry commentator Nicholas Mendes (pictured left), mortgage technical manager at London broker John Charcol, the bank’s repricing, confirms a determined push to regain its leading position in the mortgage market – and he identifies the start of a price war among lenders. “This latest move follows closely behind recent repricing from Barclays and Halifax, both of whom have trimmed rates across residential and buy-to-let ranges,” said Mendes.
Barclays introduced widespread reductions effective from today, including stand-out three and five-year fixed deals under 4% for both homebuyers and landlords, Mendes notes. Halifax followed suit, reducing selected fixed rates by up to 0.15 per cent for home movers and remortgage customers.
“In this context, HSBC’s latest rate change appears not just reactive but strategic,” he reasoned. “With cuts applied across residential, buy-to-let, and international ranges, it is clearly aiming to re-establish itself at the top of the pricing tables. Falling swap rates and a softening outlook from the Bank of England have created the conditions for lenders to move more aggressively, and HSBC is taking full advantage. We have begun the next price war.”
Mendes anticipates further activity in the marketplace among the big players. “With multiple big names now making successive reductions and competition intensifying by the day, the battle for best-rate positioning is well and truly under way. It would be no surprise to see further movement from other major lenders in the coming days.”
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The case for rate stability
While welcoming the rate cuts themselves, broker Dan Gracie (pictured centre), specialist lending director at Panthera Finance LLP, is concerned that the attention they generate could cause market instability. “I’m torn on this,” Gracie shared. “My phone pinged this morning to tell me that my own residential mortgage comes up for renewal in November so this headline is, personally, very well received. However, my heart sinks professionally whenever I see rate-related rhetoric like ‘ramps up’, ‘price-war’ or ‘slashes’ because I believe it is rate stability that enables borrowers to make informed, balanced decisions.
“News of extreme lender behaviour – and particularly extreme rate changes – tends to drive either surges or pauses in the property market, with buyers or sellers pulling out of property deals at the worst extremity. It can cause a borrower who has recently taken a mortgage out to regret the rate they are now stuck with, and it can make people deliberate for longer than is perhaps healthy and just sit on ideas instead of acting on them.”
He continued: “Of course, I want my clients to get lower interest rates – it’s better for them and they are easier to sell. But my professional preference would be for any changes to come calmly and incrementally so that there are no peaks in activity. If news of rate ‘slashes’ gets out there, we could see a notable pause in activity for a month or more and then, once rates have been ‘slashed’ - to whatever degree they actually are, it’s usually less than the hyperbole - a surge that pushes all of the lenders outside of their normal service levels and causes them to either withdraw rates or put them back up again to stem the flow of business.”
Gracie added: “Unfortunately, we are currently being subjected to multiple extreme global and national situations that could have any number of effects upon our mortgage industry and its interest rates, giving plenty of opportunity for changes that will not come calmly or incrementally.”
Meanwhile, Michelle Lawson (pictured right), director of Lawson Financial, also expresses concern about the knock on effect of the rate changes. “The summer rate wars are in full swing – however, as much as this is a boon for borrowers, it is becoming a resource and processing nightmare for lenders and brokers,” Lawson said. “I spent over an hour on HSBC’s live chat this morning to try to change a rate and then in the meantime, a further email came out for yet another rate cut from HSBC on Friday. We daren’t do something else as you can guarantee that we come away for 5 minutes and you get connected and quickly disconnected for inactivity.
“Brokers are spending more time amending products than submitting and handling new business and it is turning into a logistical and practical nightmare. Some lenders are just shaving 0.01% here and there, which begs the question of what the point is. Would it be better to wait and do less changes and more meaningful and worthwhile ones?”
Later life lending specialist, Tim Spencer (pictured right), managing director of Optimus Mortgages, also shares concerns about the rate cuts. “On face value, of course, it sounds really good for borrowers, but I would actually like more stability in the market,” Spencer said. “In the lending into later life market there are other factors affecting rates, and I feel that a lot of confusion happens for clients when they see standard rates drop, but later life lending rates don’t follow suit. From a business perspective, rate fluctuations work in my favour. As I keep my client base small and select, I am able to keep an eye on the rates lenders are offering and as a result I am able to amend a client’s application to secure them a more favourable rate if applicable. It is a small thing, but can amount to saving a clients thousands of pounds.”
