HSBC becomes first big UK lender to cut mortgage rates following positive inflation data last week.
The bank will lower rates on 16 mortgage deals starting Wednesday, with other smaller lenders also announcing rate cuts.
HSBC is expected to decrease its standard two-year fixed mortgage rate from 6.24% to 6.14% for remortgaging customers, a 0.1 percentage point drop.
The five-year fixed mortgage rate for remortgaging is anticipated to decrease by 0.2 percentage points, from 5.84% to 5.64%.
Last week’s official figures revealed a 16-month low of 7.9% inflation in the year to June, down from 8.7% in May and below economists’ expectations of 8.2%.
Following the release of these figures, average mortgage rates slightly declined for the first time since May.
Smaller lenders are also cutting costs for borrowers.
Platform, a subsidiary of the Co-operative Bank, will lower its rates by up to 0.29 points on Thursday.
Accord Mortgages, owned by Yorkshire Building Society, reduced rates by up to 0.45 percentage points on Tuesday, and Pepper Money offered its biggest reduction of the year with rates lowered by up to 0.95 points.
Experts suggest that more major lenders may follow suit soon.
David Hollingworth, from broker L&C Mortgages, stated that the HSBC mortgage rates reduction is a significant move as it could compel other lenders to reconsider their rates.
As the economic outlook improves, swap rates, guiding mortgage rates, have decreased in response to central interest rate expectations.
Two-year swap rates closed at 5.57% on Monday, down from 5.78% the previous Tuesday.
Markets are now pricing in a peak Bank Rate of between 5.75% and 6%, lower than earlier predictions of 6.75%.
Lenders may alter rates as stability returns, offering potential for further improvements after recent developments.