Natwest and Barclays have unveiled reductions to their mortgage rates as hopes build that a peace agreement in the Middle East could stabilise the interest rate environment.
Barclays has cut its rates across the board by up to 0.43 per cent, while Natwest has reduced its rates by up to 0.54 per cent, with its two-year tracker now sitting at 4.42 per cent.
The moves follow a similar decision by Santander, which recently lowered its own mortgage rates by up to 0.23 per cent.
The re-pricing comes amid shifts in swap rates, which serve as a primary benchmark for pricing fixed-rate mortgages and reflect market expectations for future interest rates over two, five, or ten-year terms.
Rachel Geddes, strategic lender relationship director at Mortgage Advice Bureau, said: “Momentum is continuing to build across the mortgage market.”
She added: “These latest reductions should also provide reassurance that market conditions are gradually improving.”
US and Iranian negotiators are reported to have reached an agreement on a 60-day memorandum of understanding that will extend the current ceasefire and kick off negotiations on Iran’s nuclear programme, according to Axios.
Whilst Iran is reported to have approved the deal, a final green light is still expected from Donald Trump, and Vice President JD Vance has hinted a deal was “very close” but added the US was “not there yet.”
The two nations exchanged strikes earlier this week, with each accusing the other of violating ceasefire terms, despite the broader peace discussions continuing in the background.
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 with significant consequences for UK households.
UK households are now bracing for a £200 rise in energy bills next month after energy watchdog Ofgem gave its latest price cap update, with the regulator saying the surge was driven by the conflict and warning costs could climb further in October.
Economic pressures from the war have stoked inflationary fears and served as the central driver for concerns over a potential interest rate hike affecting mortgage costs across the country.
In March, the Bank of England held rates in a unanimous decision over fears the conflict would send prices spiralling higher across the economy.
Mohit Kumar, chief European economist at Jefferies, said should a peace deal be formally signed the rates market “should see a greater reaction than equities.”
Kumar 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 rate expectations, with lenders pulling deals at the fastest rate since Liz Truss’s infamous mini-Budget amid growing uncertainty surrounding the war.
Nearly 500 homeowner mortgages disappeared from the market in mere days, according to financial information platform Moneyfacts, as average mortgage rates moved 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 of available products fell to its lowest count in two years.