Two leading UK banks, Santander and Barclays, have slashed their mortgage rates as experts predict a "price war".
They are the latest lenders to reduce their mortgage rates following similar moves that have been made recently by Halifax and Nationwide.
Brokers have now predicted a “price war” if other lenders follow suit.
The news comes following a very turbulent few months for borrowers and homeowners after nine consecutive Bank of England rate hikes.
The base rate is currently set at 3.5% but analysts say it could rise further to 4% next week.
Today (January 24) saw Santander's rates fell by up to 0.2% across its product range, while Barclays followed in a similar fashion.
Meanwhile, deals for new customers fell by 0.12% on fixed rates and 0.15% on selected tracker products.
Similarly, Barclays has reduced the rates on its five-year fixed rate deal for borrowers with a 25% deposit at 4.41% – a reduction of 0.27%.
For Brits on a £200,000 mortgage over 25 years, the rate reduction would mean a saving of £31 a month or £372 a year.
Barclays is also offering a two-year tracker deal for those with a 25% deposit for 3.86%, which is down from 3.99%.
It also offers "exclusive" rates for its Premier banking customers.
While mortgage rates rose rapidly at the end of last year, the managing director at Altura Mortgage Finance, Rob Gill, predicts that dips in lending activity may push lenders to further reduce their interest rates.
With uncertain economic conditions in the UK and the fallout from the disastrous mini-Budget in September, mortgage approvals for house purchases dipped to their lowest level since June 2020, according to a Money and Credit report.
Despite this, experts say that interest rates are now slowly falling.
Rob told the Finacial Advisor: “Despite bond yields and other money market rates having dropped below pre-mini Budget levels, mortgage rates remain stubbornly higher.
“However, we expect this gap to close as lenders compete for business in the new calendar year, in what looks to be a more challenging environment than 2022.
“A slow start to the year could even see a mortgage price war break out as lenders compete for business.”
Meanwhile, David Hollingworth of mortgage broker L&C said: "The pace of change in mortgage rates has picked up but in contrast to last year we are now seeing rates cut, as the price war intensifies.
"More stable and cheaper funding conditions are enabling lenders to improve rates and reverse some of the huge hikes that followed the mini budget.
"Competition between lenders is likely to be fierce as they want to lend and will therefore need to offer attractive products. I expect that we will see the fixed rate cuts continue despite the potential for another base rate increase next week."
Interest rates on the average five-year fixed mortgage have dropped well below 6% to 5.27% according to MoneyFacts, as more lenders reduce their rates.
The average two-year fixed rate is now 5.5%.
With the best deals available now heading towards 4% - with rates as low as 4.18% on a five-year fix for those with larger deposits - the market may be likely to fall in line with these cuts.
