Natwest and Barclays sweeten mortgage costs as Iran peace hopes ease interest rate fears
Natwest and Barclays have become the latest lenders to sweeten up their mortgage deals, as hopes remain high that a peace deal will be reached in the Middle East that would bring calm to the interest rate environment.
Both lenders have unveiled reductions in mortgage rates, with Barclays cutting its rates across the board by up to 0.43 per cent. Meanwhile, Natwest has cut its rates by up to 0.54 per cent with its two-year tracker cut to 4.42 per cent.
This follows a similar move by Santander, which lowered its rates by up to 0.23 per cent.
The re-pricing comes amid changes in swap rates, which serve as a primary benchmark for pricing fixed-rate mortgages and reflect market expectations for future interest rates over 2, 5, or 10-year terms.
“Momentum is continuing to build across the mortgage market,” Rachel Geddes, strategic lender relationship director at Mortgage Advice Bureau, said.
“These latest reductions should also provide reassurance that market conditions are gradually improving.”
Mortgage market hit by Middle East volatility
Interest rate expectations have been brought some reprieve through slowly emerging details around a potential peace deal between Iran and the US.
US and Iranian negotiators are reported to have reached an agreement on a 60-day memorandum of understanding that will extend the currently in-place ceasefire and kick off negotiations on Iran’s nuclear programme, according to Axios.
Whilst Iran is reported to have rubber stamped the deal, a final green light is still expected from Donald Trump.
Hopes of peace come despite the two nations exchanging strikes earlier this week, each accusing the other of violating ceasefire terms.
Vice President JD Vance has hinted a deal was “very close” but added the US was “not there yet”.
Economic pressures from the war have stoked inflationary fears and served as the central driver for fears of an interest rate hike.
Iran’s closure of the Strait of Hormuz – a narrow waterway in the Gulf where around a fifth of the world’s oil supply flows through – has triggered a global energy shock.
UK households are bracing for a £200 rise in energy bills next month after energy watchdog Ofgem’s gave its latest price cap update this week.
Ofgem said the surge was driven by the conflict, with potential to climb further in October.
Bank more likely to cut than hike rates, says Jefferies
In March, the Bank of England held rates in a unanimous decision over fears the war would send prices spiralling.
Mohit Kumar, chief European economist at Jefferies, said should a peace deal be formally inked the rates market “should see a greater reaction than equities”.
He forecast that the next move from the Bank of England “would be a cut and not a hike”, with a reduction to around three per cent “by the middle of next year”.
The mortgage market has been rocked by the volatility in the rate expectations with lenders pulling deals at the fastest rate since Liz Truss infamous mini-Budget amidst growing agitation around the war.
Nearly 500 homeowner mortgages disappeared from the market in mere days, according to finanical information platform Moneyfacts, as average mortgage rates breezed past the five per cent mark in early March.
Deal lifespans also hit a record low of just eight days in April as the overall pool available hit the lowest count in two years.