Record low mortgage deals as rate cut looms and uncertainty reigns

Economists think there is a 78 per cent chance that the Bank of England will cut base rates next Thursday and Barclays, HSBC, Metro Bank, the Leeds and the West Bromwich Building Society are among lenders who have already cut rates since the UK’s decision to leave the EU.

The intervention earlier this week by the governor of the Bank of England, Mark Carney, has led experts, such as economists at Hargreaves Lansdown, to state there is a 78 per cent chance of a base rate cut next week, and an 86 per cent chance of a cut by August.

The 10-year fix from the Coventry will cost borrowers 2.39 per cent, but to get that rate, homeowners will only be able to borrow half the value of the property.

This will mean the deal has a 50 per cent loan-to-value ratio.

And while some analysts point to such deals as evidence of rates that couldn’t have dreamt of even two years ago, others say it remains unclear what will be the longer term effects on homeowners.

Across the mortgage lending market, many of the rate reductions have so far actually been very small, with the average five-year fixed rate, for example, coming down from 3.14 per cent before the EU vote to 3.13 per cent currently.

The average rate for 10-year fixes has actually risen because of new products being offered and different loan-to-value ratios.

If there is a cut, borrowers on tracker rates will benefit, but experts are divided on whether fixed rates will fall any further, such as Charlotte Nelson, financial expert at Moneyfacts.

She said: “The link between base rates and mortgage rates is broken.”

“It’s likely we may see more cuts, but lenders will wait and see what other lenders do”, she added.

Others suggest that banks - which have increased their mortgage lending significantly - may be reluctant to reduce rates further.

Lower interest rates tend to squeeze bank profits, which is one reason that bank shares have fallen significantly since the referendum result.

“They may even be keen to sustain current rates, or increase pricing in order to regain recent months’ lost margins,” said David Whittaker, managing director of Mortgages for Business.