UK’s biggest building society will cut its five-year fixed mortgages, for new customers moving home with a 40% deposit, to a rate of 3.99%
Nationwide is offering a mortgage with an interest rate below 4% as competition between lenders intensifies ahead of the Bank of England’s next rate decision.
From Wednesday, the UK’s biggest building society will cut its five-year fixed mortgages, for new customers moving home with a 40% deposit, to a rate of 3.99%.
Other lenders have also been reducing their rates ahead of a hoped-for central bank rate cut in August.
Mortgage analyst Kylie-Ann Gatecliffe said this could be the start of a “rate war” between the big banks.
The last time Nationwide offered rates below 4% was in February.
Although this is only available for purchases right now, we hope that the re-mortgage market will follow, according to Sarah Tucker, founder of The Mortgage Mum.
Mortgage borrowing costs remain higher than homeowners have seen in a decade because lenders base their mortgage rates on BoE’s rate.
This remains at a 16-year high of 5.25%, but some forecast it will be cut at the central bank’s next meeting on 1 August because inflation is dropping.
Central banks tend to raise borrowing costs when inflation is high and reduce them when inflation is low to stimulate a sluggish economy.
Nearly 1.6 million existing borrowers will be looking to re-mortgage as their current fixed-rate deals expire, with some moving off a rate of below 2%, leaving them facing much higher repayments on their next home loan.
However, Tucker says Nationwide’s new rate is a hugely positive sign for the mortgage market during a “turbulent time”, as people struggle with high costs of living and elevated borrowing rates.
This is a fantastic sign of stability and lower interest rates ahead, she says, adding that the recent general election has helped consumers and the market to feel more stable.
The average five-year fixed homeowner mortgage rate is 5.40%, down from 5.47% on Monday, as per data from Moneyfacts.