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Major banks cut mortgages rates ahead of key Bank of England interest rate decision tomorrow
Watch our video above on how to get the best mortgage deal
THREE major banks are slashing mortgage rates as the Bank of England (BoE) gears up to make a major interest rate decision tomorrow.
NatWest, Halifax and Virgin Money are both cutting home loan deals by up to 0.31% from today.
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NatWest has announced of a number of changes to mortgages which take effect from tomorrow (August 1).
Rates on some purchase and remortgage deals will be slashed by up to 0.15%, including green purchase and high value remortgage loans.
Meanwhile, Virgin Money has today dropped rates on nine purchase and remortgage products while adding new deals.
Customers opting for a purchase mortgage at 80% loan-to-value on a five-year fix with £895 fee have seen rates drop 0.08% from 4.52% to 4.44%.
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The bank's 80% loan-to-value remortgage fee-saver deal has also been reduced by 0.11% from 4.97% to 4.86%.
Halifax, and its sister brand BM Solutions, is also slashing rates from tomorrow by up to 0.16%.
It comes after Nationwide became the first lender to offer a below 4% mortgage product since February.
The building society followed several lenders who cut rates amid expectations the BoE base rate will be cut tomorrow.
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This is when the Monetary Policy Committee (MPC), which decides the BoE base rate, will meet to decide whether to increase, decrease, or keep it the same.
The rate is at its highest point in 16 years - 5.25% - after successive rises aimed at tackling inflation.
What is the Bank of England base rate and how does it affect me?
The BoE uses the base rate as a lever to control inflation, which is a measure of how much the average basket of goods costs.
Increasing the base rate is can encourage people to save money, rather than spend it, which drives down prices.
But this also causes problems for mortgage holders, who could see their rates go up as a consequence.
A decrease in the base rate tomorrow will bring relief to hundreds of thousands facing higher home loan repayments.
There's no widespread view among economists that the BoE will cut rates tomorrow, despite inflation holding steady at its 2% target.
Alice Haine, personal finance analyst at Bestinvest, said the decision "hangs on a knife edge".
"A rate cut would certainly deliver some welcome respite for people’s personal finances, particularly borrowers grappling with heavy debts and oversized mortgages.
"Households have endured a painful series of financial blows since the BoE first began its rapid tightening cycle in December 2021.
"Fourteen successive rate increases may have already curbed the tearaway price rises that became a feature of the cost of living crisis, but they also sent borrowing costs scurrying upwards, putting households without adequate reserves under severe financial strain."
Stephen Perkins, managing director of Yellow Brick Mortgages, said he hoped NatWest and Virgin Money's rate cuts would be the "aperitif ahead of the main course, a base rate reduction, by the Monetary Policy Committee tomorrow".
"The odds look good, and the economy needs it, but the Bank of England often disappoints."
Meanwhile Ken James, director at Contractor Mortgage Services, said: "Rate cuts are always welcome but I do wonder if lenders are running out of steam, with small cuts all the fashion these days and big rate cuts left on the back-burner.
"The sentiment from many in the mortgage market is that a 0.25% base rate cut is highly probable. What we really need though is a shock to the system such as a 0.5% rate cut."
The BoE will confirm its decision for base rate tomorrow, with the announcement due at midday.
What will happen to mortgage rates in the future?
Millions of homeowners have faced higher rates after coming off deals they initially fixed when rates were low, and first-time buyers have found it harder to get on the property ladder.
Those on fixed mortgages have seen bills go up by £3,000 a year as their deals end, according to Moneyfacts.
The latest figures from UK Finance reveal around 700,000 fixed-rate deals are still due to end in the second half of the year.
Nick Mendes, from John Charcol, previously told The Sun: "We are unlikely to see the days of 1% or 2% mortgage rates again.
"It’s important to plan and budget accordingly, considering more sustainable and realistic interest rates moving forward, to avoid delaying a purchase or ultimately setting yourself up for disappointment."
The average two-year fixed residential mortgage rate today is 5.78%, according to Moneyfacts, down from 5.79% on Monday.
Meanwhile, the average five-year fixed residential mortgage rate today is 5.39%, up from 5.40% on Monday.
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Today’s average two-year tracker rate is 5.95%.
Whether mortgage rates will fall this year is guess work, but if inflation slows, it should lead to the BoE dropping base rate, which should trickle down to mortgage rates.
How do you find the best mortgage deals?
WE explain how to ensure you get the best deal on your mortgage or remortgage:
Websites such as MoneySuperMarket and Moneyfacts have mortgage sections so you can compare costs. All the banks and building societies will have their offers available on their sites too.
If you're getting confused by all the deals on the market, it might be worth you speaking to a mortgage broker, which will help find the best mortgage for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You'll also have to decide if you want a fixed-deal where the interest you're charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
Remember, that you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statement.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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