Nationwide has become the first lender in months to offer a two-year fixed rate mortgage at below 5%.
The lender revealed new prices today, including a two-year fixed rate mortgage with a rate of 4.99% and a fee of £999 for home movers.
It is also offering three other products, all for home buyers who have decent sized deposits, with sub-5% deals.
This move by Nationwide comes just a week after the Bank of England voted to hold interest rates for the second month running at 5.25%.
Since then a number of lenders have slashed rates but none of them – up until today – have cut any two-year fixed rates to below 5%.
It has raised hopes this may prompt more lenders to reduce their prices to this landmark level.
Jamie Thompson, mortgage broker at Jamie Thompson Mortgages, speaking via Newspage, said; “Where Nationwide go many usually follow. I don’t think it will be long before we see most of the high street going sub-5% for low loan-to-value mortgages.
“I wouldn’t be surprised if we start to see higher loan-to-value mortgage rates dip below 5% in the near future, too.
“Remember, many lenders will let you switch to lower rates before your mortgage completes but after a mortgage offer has been issued.
“This can allow you to search for a bargain now while the market is quiet and vendors are flexible and still benefit from potentially lower rates in a few months’ time when there could be a lot more buyers to complete with.”
More options needed for remortgagers and low deposit borrowers
Whilst the move by Nationwide was welcomed, brokers also pointed out the deals were limited to those who were purchasing a home and who had at least a 40% deposit. Indeed, all of Nationwide’s sub-5% deals were for loans of 60% loan-to-value (LTV) apart from one which was for 85% LTV customers.
Ranald Mitchell, director at Norwich-based Charwin Private Clients, said: “The product is limited to existing customers or purchase cases with a 40% deposit, so isn’t exactly inclusive.
“It is, however, a significant moment as lenders battle it out for the headlines, and other lenders will now follow suit.
“I would however like to see some serious intent from lenders, namely for someone to step forward with their best rate offers rather than the tit-for-tat gradual grinding down of rates we’ve been seeing. This would shock the market back into action, which is what everyone wants and needs.”
Nationwide’s price cut higlights
- Five-year fixed rate at 60% LTV with a £999 fee is 4.64% (reduced by 0.10%)
- Two-year fixed rate at 60% LTV with a £999 fee is 4.99% (reduced by 0.25%)
- Five-year fixed rate at 85% LTV with a £999 fee is 4.94% (reduced by 0.16%)
- Three-year fixed rate at 60% LTV with a £999 fee is 4.94% (reduced by 0.05%)
