Mortgage Strategy Top 10 Stories This Week:
This week’s top stories sees Lib Dems call for emergency mortgage summit amid Bond market chaos, and MPs to debate rent caps and upfront payments in Renters’ Rights Bill. Explore these developments and more below:
Santander forecasts 4 base rate cuts in 2025
Santander expects the Bank of England to cut interest rates four times in 2025, despite persistent inflation and volatility in bond markets. Inflation is predicted to rise slightly to 2.7%, keeping it above the Bank’s 2% target, while rising bond yields and swap rates are putting pressure on mortgage costs.
Market concerns over global tariffs and UK government borrowing plans have led to higher UK gilt yields, weakening the pound. Although many economists now anticipate only two rate cuts this year, Santander maintains its forecast of four, with the base rate ending 2025 at 3.75%. However, uncertainty in the economic outlook may prompt short-term mortgage rate increases as lenders react to market fluctuations.
HSBC debuts high earner product, cuts resi rates
HSBC is set to introduce a new fixed-rate mortgage for high earners and reduce rates on several residential products from Monday. The bank’s new two-year premier exclusive range, with a £999 fee, will be available to UK and international customers, alongside a reduced booking fee for its five-year premier exclusive range.
It will also cut rates on five-year residential mortgages across various loan-to-value (LTV) tiers. Despite rising swap rates and bond market volatility, HSBC’s reductions stand out, with experts noting that lenders may struggle to maintain lower rates if swap rates continue to rise.
Lib Dems call for emergency mortgage summit amid Bond market chaos
The Liberal Democrats have urged Chancellor Rachel Reeves to hold an emergency summit with banks to prevent mortgage spikes as borrowing costs rise. This follows a drop in the pound and rising gilt yields, driven by global tariff fears and government spending plans.
Some lenders have already raised rates, and Treasury spokesperson Daisy Cooper warns homeowners face unaffordable costs. Meanwhile, Prime Minister Keir Starmer insists the government will stick to its fiscal rules despite market concerns.
Range of house prices on London Underground map revealed
Buying a home near a London tube station is most expensive around High Street Kensington, with average mortgage costs of £9,890 per month, and cheapest near Heathrow at £1,316, according to Alexander Hall.
The Waterloo & City and Circle lines have the highest average mortgage costs, while the DLR and Elizabeth Line are the most affordable. The District Line has the biggest price gap, ranging from £9,890 in High Street Kensington to £1,642 in Upney.
The analysis highlights how moving further along a tube line can significantly reduce mortgage costs in the capital.
MPs to debate rent caps and upfront payments in Renters’ Rights Bill
MPs will debate amendments to the Renters’ Rights Bill, including rent caps and limits on upfront payments, when it returns to Parliament. The Bill seeks to ban Section 21 evictions, limit rent increases to once a year, and apply the Decent Homes Standard to private rentals.
Proposed changes include capping rent rises to inflation or wage growth, whichever is lower, and banning landlords from demanding multiple months’ rent in advance. Supporters argue the Bill needs stronger protections for tenants, while landlords warn restrictions could reduce rental supply. The Bill also introduces an Ombudsman, stricter landlord penalties, and greater tenant rights.
Price cuts on shorter-term fixes, but five-year rates increase: Moneyfacts
Despite concerns over rising gilt yields, mortgage rates saw little change this week. Some lenders, including HSBC and First Direct, cut selected rates, while others, like Virgin Money, raised them.
Specialist lenders and building societies also adjusted pricing, with lower LTV loans seeing reductions and higher LTV bands facing increases. Notable new deals included Yorkshire Building Society’s 5.25% two-year fix at 90% LTV.
Public stake in NatWest falls below 9% after further share sale
The Treasury has reduced its stake in NatWest to 8.9% after selling 86 million shares, continuing its plan to fully exit by 2025-26. Chancellor Rachel Reeves scrapped a public sale, citing poor value for money.
The government’s holding has dropped from 84% since the 2008 bailout, recouping over £20bn. NatWest CEO Paul Thwaite expects full privatisation as early as mid-2024.
Lenders search for calm in turbulent bond market to avoid mortgage rises
Lenders are watching bond market turmoil before adjusting mortgage rates, as UK government borrowing costs hit a 25-year high and the pound slumped. Concerns stem from potential global tariffs under US President Donald Trump and Chancellor Rachel Reeves’ £70bn spending plans.
While gilt yields have risen, market expectations for a Bank of England rate cut remain steady. Experts suggest mortgage rates could edge up but advise against panic unless bond market volatility persists.
MAB confirms two new appointments to boost growth
Mortgage Advice Bureau (MAB) has appointed Rachel Geddes as strategic partnerships director and Felicity Barnett as lending operations manager to support its growth plans.
Geddes, with 20 years of experience in financial services, including roles at Santander and Countrywide, has been with MAB for 13 years and managed her own brokerage for 10.
Barnett, with over 20 years of experience in business growth and stakeholder relationships, has worked at Nationwide, Skipton Building Society, and The Mortgage Brain.
Both will focus on enhancing MAB’s new build proposition and expanding market share, with MAB’s CEO and distribution director expressing confidence in their roles.
Inflation preview: Higher living costs heap pressure on rate cut hopes
Consumer price inflation is expected to rise to 2.7% in December, driven by increases in food and petrol prices, according to Deutsche Bank. Petrol prices are forecast to rise by 1.2%, while grocery inflation is predicted to increase by 3.7%. Rent price growth eased slightly to 0.6%.
Inflation is expected to rise further in 2025 due to higher wages and rising food and energy costs, putting pressure on expectations of Bank of England rate cuts. Markets now predict two rate cuts in 2025, with a 64% chance of a quarter-point cut in February. Hargreaves Lansdown’s Sarah Coles notes that while higher inflation could slightly affect mortgage rates, it is largely priced in.