Mortgage lenders hoping for busy start to 2025 but rate hikes may be on their way
Banks and building societies will be hoping for a busy start to 2025 by offering competitively priced rates and more generous loan sizes. However, as the value of the pound falls and government borrowing costs rise following Rachel Reeves's budget, fixed-rate mortgage price hikes may not be far away.
HSBC has announced two separate mortgage rate improvements this year, while Halifax lowered some rates by up to 0.35%. Most mortgage lenders still offer a range of competitively priced fixed rates, including HSBC's 4.20% two-year fix and its 4.06% five-year fix, but these rates may not be available for long.
Mortgage lenders are undoubtedly offering more generous income multiples and larger loan sizes, partly because the Bank of England base rate changes have enabled them to reduce their affordability stress tests.
Santander is still forecasting four base rate cuts from the Bank of England in 2025 despite sticky inflation and turbulent bond markets.
Santander forecasts four base rate cuts from the Bank of England in 2025, despite sticky inflation and turbulent bond markets.Santander forecasts four base rate cuts from the Bank of England in 2025, despite sticky inflation and turbulent bond markets.
Frances Haque, the Chief Economist at Santander UK, said, “This month, we’re already seeing swap rates edge up as they respond to volatility in the bond market, caused by an uncertain economic outlook for 2025 both at home and abroad. As such, lenders may well – in the short-term - nudge up pricing to reflect the higher swaps.
"With just less than a month to go until the next Monetary Policy Committee announcement, all eyes are on this week’s inflation and GDP data to give some indication of how close the next cut from the Bank will be. As it stands, with inflation proving to be more persistent but with growth weakening, the MPC is likely to proceed cautiously. Our own forecasts continue to expect a further four cuts over the course of this year, with base rate ending the year at 3.75%, and remaining between 3-4% for the foreseeable.”
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The information contained within was correct at the time of publication but is subject to change.
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