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Mortgage Market Defies Inflation Trends with Rate Cuts by Major Lenders

In a surprising twist, major mortgage lenders in the UK, including Santander, Coventry Building Society, and Skipton, have announced reductions in their mortgage rates. This move comes despite a recent unexpected rise in inflation, which has reached 4%, still notably above the Bank of England’s target of 2%.

Santander has taken a significant step by introducing cuts of up to 0.45%, effective immediately. However, it’s important to note that alongside these reductions, certain exclusive rates for first-time buyers have been withdrawn. This balancing act reflects the complex economic landscape faced by lenders.

Skipton Building Society has announced further rate cuts, with up to 0.27% reduction on selected fixed-rate mortgage deals for new customers. These reductions include a notable cut in its 100% mortgage rate for first-time buyers. Following a previous reduction of up to 0.49% on a range of products, Skipton’s most substantial cut is now on its two-year fixed rate for purchase or remortgage at 75% loan-to-value, which has decreased from 4.99% to 4.72%, accompanied by a £1,495 fee.

The competitive mortgage market is also evident in Skipton’s five-year fixed rates at higher loan-to-value (LTV) ratios. They are offering a five-year fix for home purchase at 4.96% (95% LTV) with a £1,295 fee, and a fee-free five-year deal at 90% LTV for purchase or remortgage at 4.84%.

Mortgage brokers are closely monitoring the situation, with the recent marginal increase in inflation raising concerns about the potential for further drops in the best fixed-rate mortgage deals. The lowest two-year rates are currently around 4.42%, and five-year fixed rates are at approximately 3.89%.

David Hollingworth, from London & Country Mortgages, remarked, “Swap rates have nudged up slightly but so far no higher than levels that have already been seen in recent weeks. We will have to see what happens, but clearly it won’t add weight to the calls for imminent rate cuts by the Bank of England. I think we’ll still see cuts in fixed rates and some lenders are trying to keep up with the best-buy deals. If we see swaps edge up that could underline that fixed rates may not keep falling below the current best rates.”

Aaron Strutt from Trinity Financial noted the relentless nature of the current rate changes, stating, “Lenders do not seem to be bothered about the inflation figures at the moment. There have been a huge amount of rate changes over the past few days, not just from the big lenders but also the smaller banks and building societies. Every time we think rates are likely to stabilise and will not come down any more, we get another email to say prices are getting better. The rate changes just keep coming, and they are unlikely to stop anytime soon.”

According to Moneyfacts, the average two-year fixed residential mortgage rate remains at 5.62%, and the average five-year fixed residential mortgage rate is 5.24%, both unchanged since the announcement of the inflation rise. This stability amidst a volatile economic environment highlights the dynamic nature of the UK mortgage market.