NatWest has launched a mortgage deal offering the lowest rate on the market – with other major lenders also announcing cuts to prices.
From Tuesday, NatWest will cut its five-year fixed mortgage deal from to 3.77 per cent for those with large deposits of 40 per cent or more of their property purchase price.
The deal, which is only available for those buying homes, will go below Halifax’s rate of 3.81 per cent, which is the current cheapest on the market.
The cut comes as other lenders have announced rate reductions for the start of the week.
Barclays is cutting several of its rates from Tuesday, including a reduction on its five-year fix for remortgages, which will go from 4.06 per cent to 3.93 per cent.
HSBC will also reduce rates, though it has not confirmed what its new rates will be.
The NatWest deal comes with a hefty fee of £1,495, so those getting a smaller loan will need to consider whether it is the best option for them.
For a rate of 3.82 per cent, borrowers can get a lower fee of £995.
“This is another hugely positive move by NatWest and just adds to the ongoing momentum in the mortgage market,” said Justin Moy of EHF Mortgages, speaking to the Newspage news agency.
“Prior to Monday, competition among lenders had shown signs of easing slightly, as they looked to manage their pipelines and strike a balance between winning business and maintaining service levels,” said Nicholas Mendes of John Charcol brokers.
Mortgage rates have dropped over the past few weeks, with reductions picking up early last month, after the Bank of England finally opted to cut the base rate from 5.25 per cent after seven consecutive meetings of holding it at a 16-year high.
Fixed mortgage rates tend to follow Swap rates, which are based on long-term predictions of where the Bank of England base rate will go in the future.
It’s unclear how long cuts will continue for, but some brokers have said they are expecting rates of as low as 3.5 per cent by early 2025 for those with the highest deposits and equity.
Rates for those with smaller deposits or equity – known as having a higher loan-to-value (LTV) are generally higher, and research in July showed that these were not reducing at the same speed as other rates.
However, experts have said they have started to reduce too recently.
“Higher LTVs continue to come down: Nationwide and Virgin now have 75 per cent LTV five-year fix under 4 per cent, while 90 per cent fixes are starting to approach 4.5 per cent” said Peter Gettins of L&C Mortgages.
“The other shift has been for remortgage deals. Those coming off fixed rates will still be looking at significantly increased payments so more competition here would be very welcome,” he added.