Tuesday, November 5, 2024

Mortgage rate war continues as Nationwide launches cheapest deal with 3.74% interest

Must read

  • Nationwide takes Santander’s crown as the lender with the cheapest mortgage
  • The catchy rate is only open to select borrowers with small mortgages

Nationwide is launching mortgages with rates below 4 per cent, with lenders increasingly cutting homeloan prices.

The lender is launching a five-year fix from 3.74 per cent and a three-year fix from 3.89 per cent.

The current cheapest mortgage rate is from Santander, at 3.99 per cent, launched last week.

The new sub-4 per cent Nationwide rates are only available to people moving home or remortgaging, rather than first-time buyers.

On the ladder: Homeowners will welcome the overall trend for falling mortgage rates

However, Nationwide also has the cheapest first-time buyer rate, at 5.04 per cent for a five-year homeloan at 95 per cent LTV with a £999 fee.

 Nationwide’s full list of sub-4 per cent homeloans is: 

  • Five-year fixed rate of 3.74 per cent at 60 per cent LTV with a £1,499 fee, for new and existing customers moving home
  •  Three-year fixed rate of 3.99 per cent at 60 per cent LTV with a £999 fee, for new and existing customers moving home
  • Five-year fixed rate of 3.79 per cent at 60 per cent LTV with a £1,499 fee, for remortgaging customers 

The new homeloan rates will be launched on 24 September. 

The new flashy Nationwide rates are also only on offer for homeowners with smaller mortgages, and come with high fees.

Still, they come as a relief to many homeowners struggling with the increased cost of mortgages, which have been rising as the Bank of England keeps base rate relatively high to tackle inflation.

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 could well follow suit.’

Nationwide will also be helping first-time buyers by lending at up to 6 times income for those with 5 per cent deposits, rather than a maximum of 5.5 times income.

In practice, that means someone earning £30,000 a year could previously afford a house worth up to £165,000, and could now buy one worth up to £180,000.

Nationwide’s standard income multiple is 4.5 times income, and the higher rates are offered through its Helping Hand scheme for first-time buyers. 

David Hollingworth, associate director at L&C Mortgages, said: ‘Building an adequate deposit is hard enough especially when the available mortgage borrowing is capped, and prices remain high. 

‘Opening the potential for higher borrowing amounts for the right borrowers will help target the twin challenges that first-time buyers face across the UK.’

What’s next for mortgage rates?

Experts believe that mortgage rates should continue to fall.

Partly this is because base rate is likely to have peaked, at least for now. 

Base rate reached a recent high of 5.25 per cent in September 2023 after 14 consecutive hikes from December 2021. Base rate has been 5 per cent since August 2024.

As the rate cycle turned, mortgage rates began to fall and the decline accelerated over the summer, with money markets anticipating more rate cuts to come and lenders seeing their own funding costs decrease.

Additionally, falling swap rates – which factor in to the price of fixed-rate mortgages – help let lenders launch cheaper deals. 

Harris added: ‘Despite the Bank of England holding interest rates this month, lenders continue to compete for business by softening their mortgage pricing. 

‘Declining swap rates, which underpin the pricing of fixed-rate mortgages, are enabling them to offer borrowers more compelling rates.

‘Two-year fixes are also coming down, giving borrowers who want security over the shorter term increased options.’

How to find a new mortgage

Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible.

What if I need to remortgage? 

Borrowers should compare rates, speak to a mortgage broker and be prepared to act.

Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it.

Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees.

Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone. 

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. 

Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people’s borrowing ability and buying power.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice.

Interested in seeing today’s best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s online Mortgage Finder. It will search 1,000’s of deals from more than 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C

Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you. 

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage 

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