Nationwide is set to reduce interest rates on selected fixed-rate mortgage deals, effective from tomorrow. The changes will apply across two, three, and five-year fixed terms.
The lender is cutting rates by as much as 0.12 percentage points, bringing the lowest available rate down to 3.9 per cent. The reductions will benefit both homebuyers and those remortgaging with the building society.
Buyers putting down a 40 per cent deposit can now access a two-year fixed rate of 3.9 per cent, which comes with a £1,499 fee. On a £200,000 loan over 25 years, this would work out to approximately £1,052 per month, assuming the fee is added to the mortgage.
For buyers with smaller deposits, the new rates are only slightly higher. Those with a 25 per cent deposit can now secure a two-year fix at 4.04 per cent, accompanied by a £999 fee.
Meanwhile, a five-year fixed rate is available at 4.29 per cent for buyers with a 15 per cent deposit, also with a £999 fee.
For remortgaging customers, the lowest fixed rate now begins at 3.92 per cent for a two-year term.
Why are some lenders increasing mortgage rates?Â
Nationwide’s recent decision to cut some of its fixed mortgage rates stands out at a time when most lenders are heading in the opposite direction. These reductions, which apply to selected two, three, and five-year fixed deals, come as a welcome move for buyers and remortgagers alike. However, the building society’s rate cuts appear to go against the wider trend currently seen in the mortgage market.
In the past 24 hours, three major lenders—Halifax, Accord, and Santander—have all increased their fixed mortgage rates. Santander, for example, has raised rates on several of its mortgage products by up to 0.13 percentage points. These changes come in response to market expectations that there will be fewer interest rate cuts from the Bank of England during the rest of 2025 than previously anticipated.
This shift in sentiment is largely influenced by changes in Sonia swap rates, which are the rates at which banks lend to each other and are closely linked to expectations of future interest rate movements. Fixed mortgage rates tend to mirror changes in these swap rates. When swap rates rise, mortgage pricing usually follows suit—and when swap rates fall, fixed mortgage deals tend to become more competitive.
Over the last month, two-year and five-year Sonia swap rates have both increased by just over 0.2 percentage points. While this may seem a modest rise on the surface, it represents a significant upward shift in the cost of lending and poses challenges for homebuyers and landlords seeking more affordable borrowing.
Commenting on the situation, Andrew Montlake, chief executive at mortgage broker Coreco, said that lenders are gradually undoing their recent mortgage rate cuts in response to the rising swap rates. He noted that many potential borrowers had been waiting to secure better deals, expecting the market to move in their favour with further interest rate reductions.
Montlake warned that this recent turn of events could leave many borrowers feeling caught off guard, especially those who delayed making a decision in the hope of locking into lower rates. In such a rapidly changing market, he suggested that the best approach might be to act swiftly rather than hold out for uncertain future savings.
He stressed the importance of prioritising homeownership goals over trying to perfectly time the market. With the mortgage landscape becoming increasingly unpredictable, securing a suitable deal now might be more beneficial than waiting and risking higher costs or missed opportunities.
In summary, while Nationwide’s rate cuts may offer some temporary relief to those looking to buy or remortgage, the broader market trend is currently moving in the opposite direction. Borrowers are being encouraged to stay alert and consider acting sooner rather than later, especially as interest rate predictions continue to shift.
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