Three major lenders have reduced mortgage rates ahead of an expected Labour victory this week.

Halifax and Natwest have cut rates by up to 0.23%, while Clydesdale Bank said its rates will fall by 0.38%.

The reductions come amid hopes that the Bank of England will cut interest rates next month after holding the Bank Rate at 5.25% since August 2023.

A number of economists forecast a rate cut in August, which it is hoped will stimulate buyer activity.

The average two-year fixed residential mortgage rate currently stands at 5.95%, according to analyst Moneyfacts, and the average five-year rate is 5.53%..

Bank of England data last week revealed mortgage approvals for house purchases fell from 60,800 in April to 60,000 in May, while approvals for remortgaging decreased slightly from 29,900 to 29,600 over the same period.

Ryan Davies, strategy director, Bluestone Mortgages, added: “With an upcoming general election and consumer confidence still low, it’s unsurprising to see a drop in mortgage approvals.

“However, with markets now pricing in two base rate cuts this year, there is light at the end of the tunnel. We’ve already seen a number of lenders bring down their rates in the last week, and expect more to follow suit.

“For those worried about how they can climb onto or up the property ladder in the current environment, now is the time to look to their brokers for support. It is the ultimate duty of these professionals to signpost customers to the best available options for their unique circumstances so that no one should be locked out from achieving their homeownership dream.”

Mortgage approvals drop as election uncertainty ‘kept a lid’ on transactions