- Nationwide takes Santander’s crown as the lender with the cheapest mortgage
- The catchy rate is only open to select borrowers with small mortgages
Nationwide is launching mortgages with rates below 4 per cent, with lenders increasingly cutting homeloan prices.
The lender is launching a five-year fix from 3.74 per cent and a three-year fix from 3.89 per cent.
The current cheapest mortgage rate is from Santander, at 3.99 per cent, launched last week.
The new sub-4 per cent Nationwide rates are only available to people moving home or remortgaging, rather than first-time buyers.
On the ladder: Homeowners will welcome the overall trend for falling mortgage rates
However, Nationwide also has the cheapest first-time buyer rate, at 5.04 per cent for a five-year homeloan at 95 per cent LTV with a £999 fee.
Nationwide’s full list of sub-4 per cent homeloans is:
- Five-year fixed rate of 3.74 per cent at 60 per cent LTV with a £1,499 fee, for new and existing customers moving home
- Three-year fixed rate of 3.99 per cent at 60 per cent LTV with a £999 fee, for new and existing customers moving home
- Five-year fixed rate of 3.79 per cent at 60 per cent LTV with a £1,499 fee, for remortgaging customers
The new homeloan rates will be launched on 24 September.
The new flashy Nationwide rates are also only on offer for homeowners with smaller mortgages, and come with high fees.
Still, they come as a relief to many homeowners struggling with the increased cost of mortgages, which have been rising as the Bank of England keeps base rate relatively high to tackle inflation.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘Mortgage pricing has breached another barrier with Nationwide launching a sub-3.75 per cent five-year fix.
‘This move will be widely welcomed by borrowers, particularly as other lenders could well follow suit.’
Nationwide will also be helping first-time buyers by lending at up to 6 times income for those with 5 per cent deposits, rather than a maximum of 5.5 times income.
In practice, that means someone earning £30,000 a year could previously afford a house worth up to £165,000, and could now buy one worth up to £180,000.
Nationwide’s standard income multiple is 4.5 times income, and the higher rates are offered through its Helping Hand scheme for first-time buyers.
David Hollingworth, associate director at L&C Mortgages, said: ‘Building an adequate deposit is hard enough especially when the available mortgage borrowing is capped, and prices remain high.
‘Opening the potential for higher borrowing amounts for the right borrowers will help target the twin challenges that first-time buyers face across the UK.’
What’s next for mortgage rates?
Experts believe that mortgage rates should continue to fall.
Partly this is because base rate is likely to have peaked, at least for now.
Base rate reached a recent high of 5.25 per cent in September 2023 after 14 consecutive hikes from December 2021. Base rate has been 5 per cent since August 2024.
As the rate cycle turned, mortgage rates began to fall and the decline accelerated over the summer, with money markets anticipating more rate cuts to come and lenders seeing their own funding costs decrease.
Additionally, falling swap rates – which factor in to the price of fixed-rate mortgages – help let lenders launch cheaper deals.
Harris added: ‘Despite the Bank of England holding interest rates this month, lenders continue to compete for business by softening their mortgage pricing.
‘Declining swap rates, which underpin the pricing of fixed-rate mortgages, are enabling them to offer borrowers more compelling rates.
‘Two-year fixes are also coming down, giving borrowers who want security over the shorter term increased options.’