Industry welcomes five-year fixed mortgages dipping below 4%
Nationwide has become the first lender to reduce its five-year fixed mortgage rate below 4%, at 3.99%, for many months, with more expected to follow.
Interest rates for mortgages falling as the loans market anticipates a possible reduction in the Bank of England’s base rate next week – and agents have heaved a collective sign of relief.
Nationwide has become the first lender to reduce its fixed rate below 4% at 3.99% yesterday to break a trend that had lasted many months.
Other lenders, such as Halifax, Santander, TSB, Virgin Money and the Co-operative Bank, have been cutting their rates in the last two weeks.
Barclays began the latest wave of cuts last month, and now has five-year fixed rates as low as 4.08%, and two-year deals at 4.49%, it is reported.
Market boost
Estate agents will welcome the latest reductions in mortgage costs, which may help to boost the market before a slower time in August.
Knight Frank has been the first to welcome the move. Simon Gammon from its finance arm (pictured, below) says: “The arrival of sub 4% mortgages will have a sizeable impact on sentiment, provided other lenders follow. Borrowers generally feel much more comfortable when rates begin with a three, so conditions are primed for a busy autumn.
“That said, it is surprising that lenders are still cutting rates when the latest set of inflation figures failed to show much progress on some of the key points of concern among Bank of England policymakers.
“It really is a demonstration of how competitive the market is. Margins are already wafer thin, but the lenders are eager to make up for lost ground after months of disappointing levels of activity.
“We can expect rates to fall quite quickly when we do get a meaningful change in the inflation narrative.”
Now that the General Election is out of the way and a decisive result producing a stable government, many analysts expect the housing market to grow stronger.
If the Bank reduces its base rate from a 16-year high of 5.25% next Thursday that will also help to attract more home buyers.
Divided opinions
Opinions are divided though on whether the Bank will cut the rate by even 0.25%. The next opportunity after August to make a change will be in September.
And Andrew Wishart, senior UK economist at Capital Economics, warns against too much optimism. He says the markets have “only limited scope for mortgage rate reductions”.
