Is Britain’s mortgage hell finally over?

Mortgages are getting cheaper and that is unequivocally good news, writes James Moore. But the rock-bottom prices we’ve become used to might not last as long as we hope...

Mortgage rates are starting to fall, but is it enough? (PA)

On the face of things, it looks like a very happy new year for mortgage borrowers. Some of Britain’s biggest lenders have been announcing rate cuts. Halifax, the latest to move, has shaved as much as a full percentage point off some of its products. Meanwhile, HSBC has promised to follow up with cuts of its own in what brokers describe as a “fast-moving market”.

After a miserable 2023 in which rates shot up like a world champion pole vaulter, Bank of England base rates hit 5.25 per cent before the Monetary Policy Committee (MPC) pressed pause – 2024 could hardly have started better for the housing market. The speed at which mortgage prices have come down has caught some analysts by surprise. What on earth is going on?

The first big driver is the City’s expectation that the MPC will move a lot quicker to reduce rates than it has so far indicated that it is willing to do. Remember, the two- and five-year fixed rate deals that most people sign up for when they’re buying a home are priced not just on today’s base rate but on market expectations for the future.