Homeowners set to benefit from mortgage price wars, experts say

Lenders set to undercut one another after record number of homes went on market on Boxing Day

Mortgage experts are forecasting a lending price war, benefiting home-buyers as lenders compete to undercut each other.

Financial gurus predicted a raft of lenders would reduce their home-loan rates in the coming week or two, warning borrowers to grab good deals when they could.

At the same time, in a sign of the property market heating up, a record number of sellers put their homes up for sale on Rightmove on Boxing Day, the website reported.

First-time buyers were advised to grab good deals as soon as possible (AFP via Getty Images)

Just over 10,000 homes went on to the market the day after Christmas Day, a record for any Boxing Day and the highest number of new sellers in any single day of the year dating back to 2011, Rightmove said.

The number of buyers contacting estate agents about properties for sale also jumped, and was 17 per cent higher than on Boxing Day in 2022.

Mortgage brokers who spoke to The Independent were cautiously optimistic about the property market as Halifax and HSBC announced they were cutting their rates.

New two-year, five-year and 10-year fixed deals at Halifax are being reduced by up to 0.83 percentage points.

Lewis Shaw, of Mansfield-based Shaw Financial Services, forecast that lenders would relaunch mortgage product ranges and reduce rates in the next week or two.

“A price war is on the cards because most lenders missed their lending targets last year and are not going to want a repeat of that, so the likelihood is they’re all going to come out of the gates storming,” he said.

He predicted significant competition, especially around remortgaging, because the 1.6 million mortgages that are due to renew in the next 12 months represent a big chunk of the market.

“So either lenders will become very competitive on their internal rates for existing customers to keep them or they’re going to have to offer better remortgage rates to tempt them away from other lenders, so that will hopefully be positive,” Mr Shaw added.

Riz Malik, of Essex-based R3 Mortgages, said he thought lenders would be “coming out of the blocks ready to grab market share with some very aggressive pricing” once staff return from annual leave.

“Next week is when I’m expecting the rest of the high street banks to really come out and set their stall for where they’re going to be in 2024,” he said.

“They’ll be going after the remortgage market as well, because 2023 was the year of product transfer – a lot of deals were where people stayed with their lender and renegotiated a new deal as there wasn’t a huge appetite for taking on new business because nobody knew where the market was going.

“I think with everything having settled down from there onwards, a lot of lenders will have been reassured that there haven’t been the big drops in property prices that some people anticipated in 2023.”

Mr Malik warned that economic shocks could quickly make deals “a moveable feast”.

“If a lender does come out with something, it might be time to grab it and then if things do improve later on, then obviously reassess your situation closer to the time.”

(Bloomberg via Getty Images)

First-time buyers in particular should be alert to deals emerging now, as the property market may heat up later in the year, Mr Malik said.

Mr Shaw warned it would be “a fool’s errand” to try to time the market, saying: “There’s been a tendency, certainly since the Liz Truss mini-Budget, for many homeowners to want brokers to predict where market will be, and that’s not really our job.

“It’s not sensible for homeowners to try and beat the market and predict where interest rates will go.

“And trading interest rates: even the most gifted economists at some of the best investment banks in the world don’t always get this right. So it’s probably a fool’s errand to try and do that.

“Could you get a little bit of a lower rate? Maybe at the end of the year you might be able to – but you might not.”

Several housing market forecasts have pointed to house prices generally edging down this year, which could provide opportunities for buyers.

Halifax expects house prices to fall by between 2 per cent and 4 per cent, while Nationwide Building Society expects prices to drop by a low single-digit figure or remain broadly flat this year.