Mortgage Rate Cuts UK: What this means for first-time buyers

Published on
May 22, 2024

Several UK banks have recently announced that they are offering mortgage rate cuts. Barclays, HSBC, and TSB are among the banks that have announced new deals. Inevitably, this will affect first-time buyers and some homeowners who are also looking to remortgage their property soon.

In this blog post, we explain what is sparking these mortgage rate cuts in the UK and what they mean for first-time buyers in particular.

Why are banks doing mortgage rate cut deals?

Although not confirmed yet, lenders speculate that the Bank of England will cut its benchmark rate in June, which may affect mortgage rates. This is because lenders set their own base rates for customers, which is called the Standard Variable Rate (SVR), and this figure is informed by the Bank of England’s base rate.

The Bank of England’s base rate is the price it charges other lenders to borrow money. An interest rate lets you know how much it costs to borrow money or the reward for saving it.

Falling inflation rates explain why economists suspect a drop in the BoE rate. Lower energy prices, for example, are also contributing to reduced inflation.

UK banks

Bank deputy governor Ben Broadben has said that a rate cut at “some time” over the summer was “possible”.

A poll by Reuters conducted in May found that over 50% of economists expected the Bank to reduce rates to 5% in August, while just over 43% thought a cut could come in June. 

At the time of this article, the Bank of England base rate stands at 5.25%, which is at a 16-year high. Prior to this, the rate was higher for much of the 1980s and 1990s.

Statistics have revealed hikes in people struggling to repay their mortgages. For example, mortgage possession claims (the first stage of repossession) increased by a whopping 28% in England and Wales in the first three months of 2024 compared to the same time frame in 2023.

With the cost of living alongside mortgage rate increases over the past year, it has become harder for people to keep up with repayments.

What do mortgage rate cuts mean for first-time buyers?

When mortgage cuts take place, the interest rate is lower over your mortgage term. This is likely to be welcomed by borrowers, especially first-time buyers at this time. This is because the past year or so has seen higher mortgage rates, which have caused people to struggle with paying their mortgages.

Lower mortgage rates should make it easier for more first-time buyers to jump on the property ladder

How much are banks cutting mortgage rates by?

mortgage consultation

Three major banks in the UK have announced they will be cutting mortgage rates on new deals.

HSBC has revealed that it is cutting up to 0.18% percentage points for its new fixed-rate mortgage deals for residential and buy-to-let borrowers.

Barclays has announced that it is set to reduce up to 0.45% percentage points for new borrowers and remortgagers.

TSB has also reduced by up to 0.10% for two and five-year fixed rates.

This is good news for those wanting a new mortgage deal, as there should be even more mortgage options to choose from if the predicted BoE base rate reduction successfully comes to pass this summer. 

Things to know when taking on a new mortgage rate cut


Mortgage cuts may not immediately affect your payments if you are already on a fixed mortgage rate as your term needs to end first before you change, otherwise you could face an early termination fee. However, if you’re on a tracker or variable-rate mortgage, you may be immediately affected.

For those on a fixed-rate mortgage, the future deals you get when your fixed rate ends will affect you. So, if your fixed term is closely approaching its end, you will likely be affected as you switch to another term soon.

According to UK Finance, approximately 1.6 million deals will end in 2024.

First-time buyers

The mortgage cuts are good news for first-time buyers who want to climb the property ladder. Lower monthly mortgage payments will create a lower entry barrier.

Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said: “The recommended cut of up to 0.75% in mortgage rates will mean around £3,000 less interest costs on an average £200,000 mortgage over the next 2 years, which should give many borrowers some solid respite financially.”

Whether you have an existing mortgage or are borrowing for the first time, it’s important to keep a close eye on the property market. This helps ensure you are on or are buying into the best deal for you and your circumstances.

The Homebuyers Club is an online community where you can learn about and discuss the latest news in the property market with other homebuyers. Join the online community here. 

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