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Mortgage rates continue to fall as Nationwide announces a new round of rate cuts.
Britain’s largest building society is to cut its fixed-rate agreements by up to 0.26 percentage points.
The new rates will come into effect tomorrow and will include the cheapest five-year fixed rate on the market.
At the front of the queue: Nationwide will reduce rates by up to 0.26 percentage points on its two-, three-, five- and 10-year fixed-rate products with the new rates
It will offer home buyers with a deposit of at least 40 percent a rate of 3.78 percent, which is the best deal on the market.
If it were a £200,000 mortgage to be repaid over 25 years, the cost would be £1,032 a month.
The product comes with a hefty fee of £1,499, which should be taken into account even though the next best rate is substantially higher, at 3.84 per cent, offered by HSBC.
Nationwide also offers a £999 rate option on the same terms with a rate of 3.83 per cent. For those moving up and buying their home with a 25 per cent deposit, it offers a five-year fixed rate of 4.09 per cent with no fee.
Tony Castle, chief executive of brokerage PFG Mortgages, told Newspage: “It’s incredible to see rates at 3.78 per cent. Many thought we wouldn’t see this until 2025, but they have been proven wrong. This is a huge boost for both homeowners and those moving home.”
‘These rate cuts are shedding a significant amount of stardust on the housing market.’
Andrew Montlake, managing director of brokerage Coreco, also expects current rates to boost the housing market.
“Products like these will help convince potential borrowers who have been waiting for a while to dip their toes into the housing market before it gets too hot and prices inevitably start to strengthen once again, especially in high-demand areas,” he said.
The best rate for those who refinance their mortgage
One area Nationwide has also attacked is the remortgage market, where rates have been below those offered to home buyers.
From today it will cut its cheapest five-year fixed rate, aimed at remortgagers with a loan-to-value (LTV) ratio of no more than 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 per cent, although this comes with a lower fee of £995.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘A five-year fixed rate below 4 per cent is great news for those about to refinance their mortgage.
‘Competition among the big six lenders is driving rates down and borrowers are seeing the benefit.’
The best two-year solution on the market
From tomorrow, Nationwide will also be offering the new lower two-year fixed rate for those buying a home with a deposit of at least 40 per cent, offering 4.15 per cent on a £999 rate.
To put this into context, the average two-year fixed interest rate is currently 5.62 per cent, according to Moneyfacts.
Someone taking out a £200,000 mortgage on Nationwide’s lowest two-year fixed rate could expect to pay £1,072 a month if repaid over 25 years, compared with £1,243 a month for someone on the average rate.
Lower rates for first-time buyers
Nationwide is clearly keen to attract first-time buyers, too.
Its lowest five-year fixed rate, 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 the new best buy from tomorrow.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: ‘First-time buyers are not left out as Nationwide has cut its five-year fixed rate from 90 per cent LTV with a £999 fee to 4.64 per cent, providing more affordable options for those entering the property market.
Back down: In recent weeks, mortgage lenders have been cutting rates
Meanwhile, first-time buyers with the largest deposits can get as little as 3.99 per cent with Nationwide, albeit again at a rate of £1,499.
Mendes suggests borrowers remember to consider both the rate and the fee and choose the one that is 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 is crucial that borrowers weigh these costs against interest rates.
‘A lower rate with higher fees may not always be the best option for everyone, so it’s essential to carefully consider the total cost when selecting a mortgage.’
How low can rates go?
In recent weeks, major lenders have continued to compete with each other to win new customers.
Since the beginning of July, the lowest five-year fixed mortgage rate will have fallen from 4.28 percent to 3.78 percent.
Meanwhile, the lowest two-year fixed rate will have fallen from 4.68 percent to 4.15 percent during that time.
Mortgage rates have been falling in anticipation of interest rate cuts.
On August 1, the Bank of England cut interest rates for the first time in more than four years, leading many in the housing sector to speculate that mortgage rates are now firmly on a downward trajectory.
Financial markets are forecasting that the base rate will fall to around 4 percent by the end of next year, before eventually settling at around 3.5 percent.
Sonia’s swap rates, which correlate strongly with fixed-rate mortgage prices, suggest rates are unlikely to fall much further.
As of August 19, five-year swaps stood at 3.66 percent and two-year swaps at 4.08 percent. It is rare for mortgages with lower fixed rates to fall below these benchmarks.
Chris Sykes, technical director at mortgage brokers Private Finance, said: “To be honest, I don’t see rates going down much in the near future. Now is a fantastic time to get a mortgage, in my opinion.”
‘The 3.78 per cent rate is an incredible product, leaving very little margin on the table for Nationwide and is on the verge of becoming a loss-leading product.’
However, Mark Harris of mortgage broker SPF Private Clients is more confident of further rate cuts.
“With markets expecting further rate cuts, we could see a five-year fixed rate of 3.5 percent before the holidays,” Harris said.
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