Nationwide cuts mortgage rates again and will offer cheapest five-year fix

Mortgage rates continue to edge lower, as Nationwide announces a fresh round of cuts. 

Britain’s biggest building society will be reducing its fixed rate deals by up to 0.26 percentage points.

The new rates will be effective from tomorrow and will include the cheapest five-year fixed rate deal on the market.

It will offer home movers buying with at least a 40 per cent deposit a rate of 3.78 per cent, which is the market best buy.

On a £200,000 mortgage being repaid over 25 years, that would leave someone paying £1,032 a month.

The product comes with a hefty £1,499 fee, which needs to be factored in even though the next best rate is substantially higher at 3.84 per cent, offered by HSBC. 

Nationwide is also offering a £999 fee option on the same terms with a rate of 3.83 per cent. For home movers buying with a 25 per cent deposit, it is offering a 4.09 per cent five-year fix with no fee.

Tony Castle, managing director at broker PFG Mortgages told the news agency Newspage: ‘It’s incredible to see rates at 3.78 per cent. Many thought we may not see this until 2025, but they have been proven wrong. This is a huge boost for homeowners and home movers alike. 

‘These rate reductions are sprinkling some serious stardust onto the housing market.’

Andrew Montlake, managing director at broker Coreco also expects that current rates will fuel the housing market.

‘Products such as these will help convince prospective borrowers who have sat on their hands for a while to plunge into the housing market before it becomes too hot and prices inevitably begin to strengthen once more, especially in high-demand areas,’ he said.

Best rate for remortgagers

One area Nationwide has also attacked is the remortgage market, where rates have lagged behind those being offered to home buyers.

From today it will be reducing its cheapest five-year fixed aimed at people remortgaging with no more than 60 per cent loan to value (LTV) to 3.99 per cent, with a £1,499 fee.

The next lowest rate is offered by Virgin Money at 4.06 per cent, though this comes with a lower fee of £995.

Mark Harris, chief executive of mortgage broker SPF Private Clients said: ‘A sub-4 per cent five-year fix is great news for those coming up to remortgage. 

‘Competition among the big six lenders is driving rates lower and borrowers are seeing the benefit.’

Best two-year fix on the market 

From tomorrow, Nationwide will also offering the new lowest two-year fixed rate for home movers buying with at least a 40 per cent deposit, offering 4.15 per cent with a £999 fee.

To put that in context, the average two-year fix is currently 5.62 per cent, according to Moneyfacts.

Someone securing a £200,000 mortgage on Nationwide’s lowest two-year fix could expect to pay £1,072 a month if repaying over 25 years. That compares to £1,243 a month for someone on the average rate. 

Lower rates for first-time buyers

Nationwide clearly has an appetite to also attract first-time buyers.

Its lowest five-year fix aimed at first-time buyers purchasing with a 10 per cent deposit has also been cut.

Its 4.64 per cent rate with a £999 fee will be a new best-buy from tomorrow. 

Nicholas Mendes, mortgage technical manager at broker John Charcol said: ‘First-time buyers are not left out, with Nationwide reducing its five-year fixed rate at 90 per cent LTV with a £999 fee to 4.64 per cent, providing more affordable options for those entering the housing market. 

Heading down again: In recent weeks mortgage lenders have been cutting rates

Meanwhile, first-time buyers with the biggest deposits can get as low as 3.99 per cent with Nationwide, although once again with a £1,499 fee. 

Mendes suggests borrowers remember to factor in both the rate and fee and choose the one which will be cheapest overall.

He adds: ‘It’s important to remember that while low interest rates are attractive, lender fees can significantly impact the overall cost of a mortgage. 

‘It’s crucial for borrowers to weigh these costs against the interest rates. 

‘A lower rate with higher fees might not always be the best deal for everyone, so careful consideration of the total cost is essential when selecting a mortgage.’

How much lower can rates go?

In recent weeks, big lenders have continued to undercut one another to compete for new customers

Since the start of July, the lowest five-year fixed rate mortgage will have fallen from 4.28 per cent to 3.78 per cent.

Meanwhile, the lowest two-year fix will have fallen from 4.68 per cent to 4.15 per cent during that time.

Mortgage rates have been falling in the expectation that interest rate cuts are coming. 

On 1 August, the Bank of England cut interest rates for the first time in more than four years, leading many across the property industry to speculate that mortgage rates are now firmly on a downward trajectory.

Financial markets are forecasting base rate will fall to around 4 per cent by the end of next year before eventually settling at around 3.5 per cent.

Sonia swap rates, which strongly correlates with fixed rate mortgage pricing suggests that rates are unlikely to get much lower.

As of 19 August, five-year swaps were at 3.66 and two year swaps 4.08 per cent. It is rare for the lowest fixed rate mortgages to dip below these benchmarks.

Chris Sykes, technical director at mortgage broker Private Finance said: ‘To be honest, I can’t see rates going much lower any time soon. Now if a brilliant time to get a mortgage in my opinion.

‘The 3.78 per cent rate is an incredible product, that leaves very little margin on the table for Nationwide and is verging on being a loss leader.’

However, Mark Harris of mortgage broker SPF Private Clients is more confident about further rate cuts.

‘With markets expecting further rate cuts, we could see a 3.5 per cent five-year fix by the festive break,’ said Harris.