Nationwide has launched the cheapest two- and five-year fixed mortgage rates on the market, as competition between lenders hots up.
The building society’s five-year fix deal is available from today with a rate of 3.74 per cent for those with 40 per cent deposit or equity in their home, alongside a £1,499 fee.
It’s two-year fix will be on offer for new homeowners from 3.89 per cent, also for those with 40 per cent deposit or equity in their home with a £1,499 fee. This undercuts Santander’s current market-leading offer of 3.99 per cent.
Nationwide has also upped its help for first-time buyers, now lending up to six times income for those with deposits of as little as 5 per cent.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Mortgage pricing has breached another barrier with Nationwide launching a sub-3.75 per cent five-year fix. This move will be widely welcomed by borrowers, particularly as other lenders are expected to follow suit.
“Despite the Bank of England holding interest rates this month, lenders continue to compete for business by softening their mortgage pricing.”
Fixed rates are based on numerous factors including Swap rates, which broadly follow expectations of the future path of the Bank of England base rate.
Many expect there to be a further cut to interest rates, which currently sit at 5 per cent, by the end of the year.
This has fed into Swap rates falling in recent times, enabling lenders to offer borrowers more compelling rates.
NatWest is offering further reductions, with two-year fixes starting at just above 4 per cent.
Accord is also cutting fixes while MPowered has also made further reductions.
Brokers expect there to be further cuts over the course of the next year with hopes that many deals will extend to those with lower deposits or equity.
Aaron Strutt of brokers Trinity Financial said: “Given the ongoing rate cuts we are seeing it does feel like the lenders are trying to stimulate the market.
“Other lenders will probably act and follow NatWest and Nationwide pretty soon, particularly as they will want to maintain their market share.
“It is good to have another sub-4 per cent two year fix although five-year fixes seem to be edging closer to 3.5 per cent.”
However, he warned: “At the moment many borrowers are holding off for cheaper fixes but also to see what the Chancellor announces in the Budget.”
Nick Mendes of brokers John Charcol said: “Recent changes in mortgage pricing have been driven by financial markets and lenders’ competitive nature, following a challenging period.
“For lenders to price competitively, market stability was necessary. This stability began to take shape after the general election announcement, the decline in inflation towards the 2 per cent target, and the initial reduction in the bank rate.
“Looking ahead to 2025, mortgage rates are expected to decline further, likely by around 0.5 per cent. This will be driven by ongoing Bank Rate cuts and stabilising economic conditions. As economic confidence improves and inflation remains controlled, lenders will have more flexibility to offer competitive rates, making homeownership more accessible and stimulating further growth in the housing market.”
Despite the recent drop in rates, following a spike in September 2022 after Liz Truss’s mini-Budget, they are still much higher than they were in previous years.
Many coming off fixed rates of as low as 1 per cent will face a steep rise to their monthly repayment plans.
The cheapest deals have also tended to be available to those with the largest deposits – and only to those buying homes, rather than those coming to remortgage on properties they already own.
Experts suggest those who will see their deal end in the next six months should lock in a new rate now, something they can change nearer the time if a better rate becomes available.
