Nationwide cuts mortgage rates again, offers cheapest five-year mortgage rate

Mortgage rates continue to fall as Nationwide announces a new round of rate cuts.

Britain’s largest building society is cutting its fixed interest rates by up to 0.26 percentage points.

The new rates come into effect tomorrow and include the cheapest five-year fixed rate deal on the market.

Homebuyers who put down a minimum of 40 percent will get an interest rate of 3.78 percent. This is the best deal on the market.

So, on a £200,000 mortgage repaid over 25 years, someone would pay £1,032 per month.

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

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

Tony Castle, managing director at broker PFG Mortgages, told the Newspage news agency: “It’s incredible to see rates of 3.78 per cent. Many thought we wouldn’t see this until 2025, but they were proven wrong. This is a huge boost for homeowners and house movers.

‘These rate cuts are causing a lot of unrest in the housing market.’

Andrew Montlake, director at broker Coreco, also expects current rates to boost the housing market.

“Products like this can convince potential borrowers who have been sitting on their hands for a while to jump into the housing market before the market gets too hot and prices inevitably start to rise again, especially in high-demand areas,” he said.

Best rate for remortgaging

Another area Nationwide is paying attention to is the mortgage refinancing market, where interest rates lag behind those offered to home buyers.

From today, the company is cutting its cheapest five-year fixed rate, aimed at people refinancing their mortgage with a loan-to-value (LTV) of up to 60 per cent, to 3.99 per cent, with a fee of £1,499.

The next lowest rate is offered by Virgin Money at 4.06 percent, but it comes with a lower fee of £995.

Mark Harris, managing director of mortgage adviser SPF Private Clients, said: ‘An interest rate of less than 4 per cent over five years is great news for people looking to remortgage soon.

‘Competition between the big six lenders is driving down interest rates and borrowers are seeing the benefits.’

Best two-year solution on the market

From tomorrow, Nationwide is also offering the new lowest two-year fixed rate for homebuyers who put down a minimum 40 per cent deposit. The rate is 4.15 per cent with a fee of £999.

To put that into context, according to Moneyfacts, the average two-year fix is ​​currently 5.62 percent.

Someone taking out a £200,000 mortgage at Nationwide’s lowest two-year rate could expect to pay £1,072 a month if they repay it over 25 years. That compares with £1,243 a month for someone on the average rate.

Lower rates for first-time home buyers

Nationwide clearly also wants to attract starters.

The lowest interest rate over five years, intended for first-time home buyers with a 10 percent down payment, has also been reduced.

The 4.64 percent rate with a £999 fee will become the new best buy from tomorrow.

Nicholas Mendes, mortgage technical manager at broker John Charcol, said: ‘First-time buyers haven’t been forgotten either. Nationwide has reduced its five-year fixed rate from 90 per cent LTV with a fee of £999 to 4.64 per cent, creating more affordable options for people entering the housing market.

Meanwhile, first-time homebuyers making the largest deposit can get a discount of just 3.99 per cent at Nationwide, but again a fee of £1,499 applies.

Mendes advises borrowers to consider both interest and costs and opt for the cheapest option.

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

It is critical that borrowers weigh these costs against the interest rates.

‘A lower interest rate with higher costs is not always the best deal for everyone. That is why it is important to think carefully about the total costs when choosing a mortgage.’

How much lower can interest rates go?

In recent weeks, major lenders have continued to undercut each other to compete for new customers

Since the beginning of July, the lowest five-year fixed mortgage rate has fallen from 4.28 percent to 3.78 percent.

Meanwhile, the lowest fixation of the past two years will have fallen from 4.68 percent to 4.15 percent during that period.

Mortgage rates are falling because interest rate cuts are expected.

On August 1, the Bank of England cut interest rates for the first time in more than four years, leading many in the property sector to speculate that mortgage rates were now falling sharply.

Financial markets are predicting that the base rate will fall to around 4 percent by the end of next year, eventually settling at around 3.5 percent.

The Sonia swap rates, which correlate strongly with fixed-rate mortgage prices, suggest that rates are unlikely to fall much.

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

Chris Sykes, technical director at mortgage broker Private Finance, said: ‘I honestly don’t see interest rates getting much lower any time soon. I think now is a great time to get a mortgage.

‘The 3.78 percent rate is an incredible product that leaves very little margin for Nationwide and is almost loss-making.’

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

“With markets expecting further rate cuts, we could see rates of 3.5 percent over five years by the holidays,” Harris said.