Natwest has leapfrogged rivals including HSBC and Nationwide to offer the best five-year deal on the market with a new 3.77 per cent mortgage. This rate, which is down from the previous 3.89 per cent, requires borrowers to pay a 40 per cent deposit and a product fee of £1,495.
Natwest’s announcement follows HSBC’s recently launched offer of 3.81 per cent and Nationwide’s 3.78 per cent for a five-year fixed rate. Other lenders also cut their rates this week. Halifax presented a rate of 3.81 per cent for new borrowers on Monday, while Barclays reduced some of its products to 3.93 per cent on Tuesday.
Aaron Strutt of mortgage broker Trinity Financial noted that the cost of funding mortgages has fallen significantly in recent months and lenders are passing on these reductions. However, many argue that this is not being passed on quickly enough, particularly for borrowers with smaller deposits. The market is pricing in another one or two rate cuts from the Bank of England this year and it is likely that a rate of 3.5 per cent for a five-year fixed rate will soon be seen.
Last month, the Bank of England cut the base rate from a 16-year high of 5.25 percent to 5 percent – the first reduction in four years. Economists are betting that the base rate will fall to 4.75 percent by the end of the year. The next decision on the base rate is expected on September 19, but further cuts are not expected until November.
Nicholas Mendes of mortgage broker John Charcol said competition among mortgage providers had shown signs of easing slightly before today, with banks trying to balance new business and servicing existing customers. Justin Moy of broker EHF Mortgages, however, stressed that the latest offerings show lenders are still aiming to gain market share before the end of the year.
He added that more providers are likely to take similar steps in the coming days to remain competitive. Lloyds announced last week that it would allow first-time buyers to borrow up to 5.5 times their salary to help them get into the property market – increasing the amount they can borrow by up to 22 per cent. Not only Lloyds, but also Nationwide and Skipton Building Society offer similar no-deposit loans.
