The recent rate cut from NatWest is part of a broader trend, as other lenders have also announced reductions at the start of the week.
Barclays will lower several of its mortgage rates from Tuesday, including a decrease on its five-year fixed-rate remortgage, which will drop from 4.06% to 3.93%.
HSBC is also set to reduce its mortgage rates, although the new rates have not yet been specified.
It’s worth noting that the NatWest deal, while attractive, comes with a significant fee of £1,495. Borrowers taking out smaller loans should weigh this cost against the potential benefits of the lower rate to determine if it’s the right choice for them.
Borrowers can now access a mortgage rate of 3.82% with a lower fee of £995. This new option offers a reduced cost compared to the previous higher fees associated with similar rates.
Justin Moy of EHF Mortgages commented on this development, saying, “This is a significant move by NatWest and adds to the positive trends we are seeing in the mortgage market.” His statement reflects the broader impact of NatWest’s competitive rate on the market.
Nicholas Mendes from John Charcol brokers added, “Prior to Monday, there were signs that competition among lenders was easing slightly. This was partly because lenders were trying to manage their pipelines effectively while balancing the need to attract business with maintaining their service standards.”
The overall trend in mortgage rates has been downward recently. This shift started picking up pace early last month, following a decision by the Bank of England to cut the base rate from 5.25%. This move came after seven consecutive meetings where the base rate had been held at a 16-year high, contributing to the recent wave of rate reductions across the mortgage market.
Fixed mortgage rates generally track Swap rates, which are determined by long-term predictions about the future direction of the Bank of England base rate. These Swap rates provide an indication of where interest rates are expected to be in the future, influencing the rates offered by lenders.
The continuation of current rate cuts is uncertain. Some brokers have suggested that we might see rates as low as 3.5% by early 2025 for borrowers with substantial deposits and high equity. This forecast hinges on future economic conditions and decisions made by the Bank of England.
For borrowers with smaller deposits or lower equity—often referred to as having a higher loan-to-value (LTV) ratio—the rates tend to be higher. Research conducted in July revealed that these higher LTV rates were not falling as quickly as those for lower LTV loans. However, recent data suggests that these higher LTV rates are beginning to decrease as well.
Peter Gettins of L&C Mortgages highlighted the recent changes, saying, “Rates for higher LTV loans are starting to drop. Nationwide and Virgin have now introduced five-year fixes under 4% for 75% LTV, while 90% LTV fixes are approaching 4.5%.” This shift indicates a positive trend for borrowers with higher LTV ratios.
Additionally, there has been a noticeable change in the remortgage market. Gettins added, “Borrowers refinancing from fixed rates are still facing higher payments, so increased competition in this area would be beneficial.” The introduction of more competitive rates could offer relief for those looking to remortgage and potentially ease the financial burden of higher payments.
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