Table of Contents
- Nationwide overtakes Santander as the bank with the cheapest mortgage
- The attractive rate is only open to selected borrowers with small mortgages
Nationwide is launching mortgages with rates below 4 percent as lenders increasingly cut home loan prices.
The lender is launching a five-year fix from 3.74 percent and a three-year fix from 3.89 percent.
The cheapest mortgage rate currently is that of Santander, at 3.99 percent, launched last week.
The new national rates below 4 percent are only available to people moving home or refinancing their mortgage, not first-time buyers.
On the ladder: Homeowners will welcome the general trend of falling mortgage rates
However, Nationwide also has the cheapest rate for first-time buyers, at 5.04 per cent for a five-year home loan with a 95 per cent LTV and a fee of £999.
The full list of Nationwide’s sub-4 percent home loans is:
- Five-year fixed rate of 3.74 per cent at 60 per cent LTV with a fee of £1,499, for new and existing customers moving home
- Three-year fixed rate of 3.99 per cent at 60 per cent LTV with a fee of £999, for new and existing customers moving home
- Five-year fixed rate of 3.79 per cent with a 60 per cent LTV and a fee of £1,499 for customers refinancing their mortgage
New home loan rates will be released on September 24.
Nationwide’s flashy new rates are also only offered to homeowners with smaller mortgages and come with high fees.
Still, they come as a relief to many homeowners struggling with rising mortgage costs, which have been increasing as the Bank of England keeps the base rate relatively high to tackle inflation.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘Mortgage prices have broken another barrier with Nationwide launching a five-year fixed rate below 3.75 per cent.
‘This move will be welcomed by borrowers, particularly as other lenders may follow suit.’
Nationwide will also help first-time homebuyers by providing loans of up to six times their income for those with 5 per cent deposits, up from a maximum of 5.5 times their income.
In practice, that means someone earning £30,000 a year could previously buy a house worth up to £165,000, and could now buy one worth up to £180,000.
Nationwide’s standard revenue multiple is 4.5 times income, and the highest rates are offered through its Helping Hand program for first-time buyers.
David Hollingworth, associate director at L&C Mortgages, said: ‘Getting a suitable deposit is difficult enough, especially when available mortgage credit is limited and prices remain high.
‘Opening up the possibility of higher loan amounts for the right borrowers will help address the two challenges faced by first-time buyers across the UK.’
What’s next for mortgage rates?
Experts believe that mortgage rates should continue to fall.
In part, this is because the base interest rate is likely to have peaked, at least for now.
The base rate hit a recent high of 5.25 percent in September 2023 after 14 consecutive increases since December 2021. The base rate has been 5 percent 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 decline.
In addition, falling swap rates (which are factored into the price of fixed-rate mortgages) help lenders launch cheaper deals.
Harris added: ‘Despite the Bank of England holding interest rates on hold this month, lenders continue to compete for business by easing their mortgage pricing.
‘The decline in swap rates, which support fixed-rate mortgage prices, is allowing them to offer borrowers more attractive rates.
‘Two-year repayment terms are also coming down, offering greater options to borrowers who want short-term security.’
