Mortgage lenders slash rates delivering savings worth up to £5,000 over 2 years

Banks and building societies are being drawn into a full-blown mortgage price war, with homeowners set to benefit from a surge of rate cuts that could slice thousands off the cost of a typical loan.

A raft of major lenders including Virgin Money, The Mortgage Works, HSBC, Santander, Barclays, and Lloyds have already slashed mortgage rates, with more expected to follow in what brokers are calling a "gloves off" battle for business.

The average two-year fixed-rate deal is now hovering just above 4%, but the re-emergence of sub-4% deals marks a sea change in a market battered by high borrowing costs.

Some experts say rates could drop as low as 3.5% by the end of the year, with the prospect of three or more Bank of England base rate cuts in 2025 helping to drive down the cost of borrowing. For homeowners, the impact could be dramatic.

Take a typical £200,000 mortgage over 25 years. A cut from 5.5% to 4% would save borrowers around £190 a month - or more than £4,500 over a standard two-year fixed-rate deal.

A move to 3.75 per cent would deliver even bigger savings of around £210 a month, or £5,000 over two years.

Brokers say these are not just token cuts either - with Virgin Money and The Mortgage Works making aggressive 0.25 percentage point reductions, while more are expected from NatWest, Halifax and Nationwide within days.

David Stirling of Mint Mortgages said: "The week is heating up fast. We've seen wave after wave of rate cuts - and the big guns haven't even fully joined in yet.

"With the Bank of England rate cut looking increasingly inevitable, the mood music for borrowers is sounding very sweet indeed."

The cuts are being driven by a potent cocktail of global economic shifts. Donald Trump's latest tariff sabre-rattling has raised fears of a slowdown, while inflation is easing faster than expected. This has led markets to bet on several interest rate cuts from the Bank of England this year - starting as early as May.

Financial adviser Lewis Shaw said: "It's not quite a war - yet - but all the signs are there. The major players are sharpening their pencils and limbering up for a fight for mortgage business."

Emma Jones of , told Newspage: "Many households are coming to the end of fixed rate deals this summer. If you're within six months of expiry, this could be a golden moment to lock in something competitive.

"A full-blown price war could bring the best rates we've seen in years."

With affordability stress easing, some lenders are also quietly relaxing how much borrowers can take on - raising the prospect of renewed upward pressure on house prices.

Shaw added: "We're heading into classic boom territory - low rates, relaxed affordability, and hungry lenders. Most won't expect it, and many could be caught off guard."

Despite the upbeat tone, experts warn the global backdrop remains volatile - with Chinese retaliation to US tariffs, supply chain risks, and political uncertainty all capable of throwing a spanner in the works.

Rohit Kohli of The Mortgage Stop said: "This is a golden window - but it won't stay open forever. Anyone thinking of moving or remortgaging should act quickly. The rate rollercoaster isn't done yet."

And while lower rates offer relief to borrowers and political capital to Labour's Rachel Reeves and Sir Keir Starmer - who have pledged to boost household incomes - the wider economic picture is murky.

Falling rates reflect fears of a stagnating economy, weaker pay growth, and a tougher jobs market - a fact not lost on economists. As ever, the homeowner's gain could come at a cost elsewhere.

Still, for the millions coming off fixed deals this summer - or still reeling from the sharp rises of the last two years - the battle among lenders couldn't come soon enough.