Banks slashed mortgage rates again this weekend as the prospect of monetary tightening from the Bank of England receded even further into 2015.
Lenders had started increasing rates earlier this year as they believed the booming British economy would lead policymakers to raise interest rates.
But the Bank’s monetary policy committee has resisted lifting rates until real wages start to rise, and sudden fears about a weak global recovery have pushed those plans even further into the future.
As a result, swap rates dived last week, letting banks fund themselves cheaply in the market and allowing them to offer ultra-cheap loans.
HSBC is offering mortgages with a rate of as little as 0.99 per cent, although the product comes with a fee of £1,999. Its two-year fixes have been cut to 2.49 per cent.
Similarly Barclays has cut the rate on some of its two-year fixed loans to 1.85 per cent with a fee of £1,999, and to guard against a rate hike is offering a 10-year fixed rate of 3.49 per cent with a fee of £999.
It comes after RBS chief executive Ross McEwan warned that borrowers need to prepare for a rise in interest rates, as most RBS and NatWest mortgage borrowers have never experienced an increase in their repayments. His bank recently chopped its own two-year mortgage rates to 1.94 per cent.
Panmure Gordon’s David Buik said the big four are determinedly defending themselves against challengers.
“With competition manifesting itself in a very aggressive manner from the likes of TSB and Virgin Money and to a lesser degree Co-op and Aldermore, the Big Four will be desperate not to surrender market share,” Buik said.
Meanwhile Joanna Elson from the Money Advice Trust backed McEwan’s call to tell borrowers about rising rates: “We all need to do more to prepare mortgage payers for future rate rises, which our research with the Building Societies Association shows could tip more than one in four into difficulty.”