Mortgage lenders cut rates as house prices bounce back for Easter

House prices are set to bounce back in spring as lower mortgage rates lure buyers back into the market.

The number of property sales increased by 1pc to 82,940 between January and February, according to a report published by HMRC on Thursday.

The increase in transactions were due to improved buyer confidence as inflation and interest rates begin to steady, mortgage lenders said.

The Bank of England has held the base rate at 5.25pc since August, but this week accounting firm KPMG predicted the Bank would rates four times this year. Inflation, meanwhile, fell to a two-year low of 3.4pc in February.

Santander, HSBC and Barclays reduced mortgage rates this week, while others unveiled new deals to lure in homebuyers who “sat out” of the market in 2023.

Barclays cut fixed rates by up to 0.25 percentage points, with its two-year product now at 4.64% with a £999 fee.

HSBC’s equivalent deal is at 4.33% while Santander’s cuts include a five-year remortgage offer fixed at 4.34%.

Experts predict fixed mortgage rates could dip below 4pc within weeks as they react to an improving economic picture, easing affordability pressures on borrowers and fuelling optimism among homeowners.

The average two-year fixed-rate deal is now 5.8pc and the average five-year deal is 5.38pc, according to analyst Moneyfacts.

Nick Leeming, chairman of estate agent Jackson-Stops, said: “Whilst the figures show signs of stability, recent falls in inflation and the expectation that the Bank of England will cut the base rate in May is paving the way for a spring bounce.”

Yesterday, Yorkshire Building Society announced a 99pc mortgage that would allow a buyer with a £5,000 deposit to get a mortgage on a property worth up to £500,000.

Kevin Roberts, of Legal and General Mortgage Services, said: “While challenges do remain, it is encouraging to see far more competition on pricing and product innovation than tighter economic conditions allowed last year.”

However, HMRC’s figures show the number of property transactions was still 6pc lower than it was in the same month last year.

Stuart Cheetham, of broker MPowered Mortgages, said the prospect of progressively cheaper fixed rate deals in the coming months “had brought many of the would-be buyers who sat out 2023 back to the table”.

He said: “With estate agents reporting an uptick in both the number of prospective buyers and the number of homes coming on to the market, the property market has become noticeably more free-flowing and the sales pipeline is getting steadily healthier.”

However, Mr Cheetham warned that buyer demand was not yet outstripping supply and resulting in price inflation.

He added: “With the number of completed transactions rising for two months in a row since the start of 2024, it’s clear the reduction in mortgage rates has unblocked the property market.

“But it’s too early to conclude that this will inevitably turn into higher prices.”

Spring could be an ideal time for sellers to market their homes, said Nicky Stevenson, of estate agents Fine & Country,

She said: “First-time buyers should be particularly encouraged by lower mortgage rates. They are the foundation of the property market, and having this portion of buyers back buying in greater volumes will help increase transactions further.

“With demand building, this is a good time of year for sellers to begin marketing their property.

“Pricing sensibly remains important, particularly for those who are pinning hopes on moving quickly.”