Nationwide Offers Sub-4% Mortgage Rate Amid Growing Competition

Nationwide Building Society, the UK’s largest building society, is now offering a mortgage with an interest rate below 4% as lenders intensify competition ahead of the Bank of England’s upcoming rate decision. Starting Wednesday, Nationwide will reduce its five-year fixed mortgage rate for new homebuyers with a 40% deposit to 3.99%.

This move by Nationwide marks the first time since February that they have offered rates below 4%. Other lenders are also lowering their rates, anticipating a potential central bank rate cut in August. Mortgage analyst Kylie-Ann Gatecliffe suggests this could signal the beginning of a “rate war” among major banks.

Sarah Tucker, founder of The Mortgage Mum, expressed optimism, stating, “Although this is only available for purchases right now, we hope that the re-mortgage market will follow.” The high borrowing costs, driven by the central bank’s rate currently at a 16-year high of 5.25%, have been challenging for homeowners.

There is hope among some analysts that the Bank of England will cut rates at its next meeting on 1 August, given the current trend of falling inflation. Central banks typically adjust borrowing costs based on inflation rates and economic conditions.

With around 1.6 million borrowers needing to re-mortgage as their current fixed-rate deals expire, many are facing significantly higher repayments compared to their previous rates, which were often below 2%. Tucker highlighted Nationwide’s new rate as a “hugely positive sign for the mortgage market” during these turbulent times, marked by high living costs and borrowing rates.

The average five-year fixed homeowner mortgage rate has decreased to 5.40% from 5.47%, and the average two-year fixed homeowner mortgage rate is now 5.81%, down from 5.88% on Monday, according to data from Moneyfacts.

Finance expert Rachel Springall from Moneyfactscompare.co.uk commented, “Mortgage rates could fall further, but it is difficult to tell how quickly and by what margins.” She added that while some are hopeful for an August rate cut by the Bank of England, opinions among economists are mixed, with some predicting a potential cut not until September due to persistent service inflation.