Money Wellness
Illustrated image of a house. Could interest rates drop from June?
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calendar icon21 May 2024

Could an interest rate cut be on the horizon?

Several UK lenders have recently reduced their mortgage rates. They have done so ahead of a predicted interest rate drop next month, which will provide much-needed relief for those looking to buy a home or switch to a better deal.

Barclays leads the way with greatest rate cut

Among the lenders cutting rates, Barclays has made some of the most significant changes.

The bank has reduced the rate on a five-year remortgage deal from 4.77% to 4.32% for homeowners with a 40% deposit. While the rate on its two-year fix has dropped from 4.94% to 4.61%, although it comes with a £999 fee.

These cuts by Barclays are a clear sign that the lender is looking to attract more customers and remain competitive in the market.

For people needing to remortgage or thinking about buying a home, these reduced rates will save them a lot over the life of the mortgage.

Other Lenders Follow Suit

Barclays isn't the only lender to reduce mortgage rates in recent days. Other notable names include:

  • HSBC
  • TSB
  • Skipton Building Society

While these lenders have made smaller cuts compared to Barclays, it's still a positive sign for borrowers. It should encourage others to follow suit, leading to a fresh wave of competition in the mortgage market. Something that has been missing since rates started to rise in December 2021.

Bank of England rate cut expectations fuel mortgage rate reductions

The recent rate cuts by UK lenders have been largely driven by growing expectations that the Bank of England will soon start lowering interest rates.

Last week, it held interest rates at a 16-year high of 5.25%. But economists are now more confident that a rate cut could be on the horizon, with a reduction predicted when the Bank of England next meets in June.

As a result, swap rates, which reflect market expectations for interest rates and are used by lenders to price their mortgage deals, have been pushed down. This has, in turn, led to lenders offering more attractive rates to borrowers.

Relief for homebuyers ahead of general election

The timing of these mortgage rate cuts is particularly significant, with housing a key battleground for the Conservatives and Labour ahead of an autumn general election.  

With more affordable mortgage deals available, first-time homebuyers may find it easier to take their first step onto the property ladder or move to a new home. Although, if these rates are anything to go by, they will have had to save a fairly substantial deposit first.

Avatar of Caroline Chell

Caroline Chell

Caroline has worked in financial communications for more than 10 years, writing content on subjects such as pensions, mortgages, loans and credit cards, as well as stockbroking and investment advice.

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