Nationwide slashes mortgage rates

Britain’s biggest building society is slashing mortgage rates and will now offer the cheapest fixed deal on the market. 

Nationwide will cut rates across a raft of products from tomorrow, including its two-year fix for those moving home with a 40 per cent deposit. 

This will be cut from 4.5 per cent to 4.35 per cent – making it the cheapest deal on the market. However, it comes with a chunky £1,499 fee.

The mutual is also offering the joint-cheapest five-year fix on the market at 4.49 per cent, the same rate that is being offered by rival HSBC. 

It is also for those buying a new home with 40 per cent to put down, and comes with a £999 fee. 

Virgin Money will also make rate cuts, trimming its two-year fixed purchase rates by up to 0.26 per cent, its five-year equivalents by up to 0.24 per cent. It will cut two-year remortgage rates by up to 0.24 per cent, too. 

It is yet another sign the tide may be turning on mortgage rates, after several weeks of increases brought on by uncertainty around the conflict in the Middle East. 

Good news: Mortgage rates have been cut at Nationwide, following similar moves from rivals

Halifax lowered its fixed remortgage rates by up to 0.25 percentage points last week, following cuts by HSBC and First Direct.

Nationwide’s biggest rate cuts were for first-time buyers. A five-year fix for those with a 10 per cent deposit now costs 4.89 per cent with a £999 fee, which is a 0.36 basis point reduction. 

Its two-year fixed rate for first-time buyers with a £999 deposit now costs 4.69 per cent, a 0.26 basis point reduction.  

Aaron Strutt of mortgage broker Trinity Financial said: ‘This is good news. Mortgage rate reductions of up to 0.36 per cent make a real difference to monthly mortgage repayments. 

‘Nationwide’s lowest two-year fixes for first time buyers with a 10 per cent deposit will start from 4.86 per cent which again looks much more attractive than at previous times in recent months.’ 

However, other mortgage experts sounded a note of caution that rates could start to rise again at short notice as the economic uncertainty continues. 

Gerard Boon, managing director of Boon Brokers, said: ‘Nationwide’s latest rate cuts are a sign that competition is returning to the mortgage market among the major lenders. 

‘However, it appears that the majority of mortgage lenders are still hesitant to reduce their interest rates due to the uncertainty around the UK’s economy. 

‘Given that inflation is still well above the Bank of England’s 2 per cent target, if the war in Iran does not end over the next few weeks, the Monetary Policy Committee may feel pressure to increase the base rate. This may indirectly increase mortgage rates across the board.’

The average two-year fixed mortgage rate today is 5.77 per cent, according to rates scrutineer Moneyfacts, compared to 5.69 per cent for a five-year fix. 

Before the conflict began the average rates were 4.83 and 4.95 per cent, respectively. 

On a £200,000 mortgage with a 25-year term, this is the difference between paying £1,165 per month and £1,261 per month on a two-year fix.  

Emma Jones, managing director at Runcorn-based specialist broker When the Bank Says No, said: ‘Last week’s momentum has continued into this week, despite no clear evidence that the Middle East conflict is close to being resolved.

‘Lenders appear more confident but people considering buying or remortgaging should not get complacent and assume rates will continue to fall because we have seen how quickly things can turn in recent months.’

It is possible that banks are cutting rates in order to tempt in more new customers, according to another mortgage insider, rather than because they see the Middle East conflict being resolved soon. 

Omer Mehmet, managing director at Welling-based Trinity Finance, said: ‘You sense that lenders are keen to boost their business volumes right now, as the way rates are being cut does not entirely sync with geopolitical events, which remain uncertain.’