The cheapest two-year fixed rate mortgages have dipped below 5 per cent interest for the first time since June.
Nationwide is the lender behind the market-leading rate, which it has announced today as part of a range of cuts.
The mutual will slash its mortgage rates by up to 0.38 percentage points across its two-year, three-year and five-year fixed rate product range.
Home movers, first-time buyers and those needing to remortgage all stand to benefit from the latest wave of cuts.
Rate cut: Nationwide has announced another round of cuts to many of its mortgage products
New customers moving home with at least a 40 per cent deposit will now be able to secure a two-year fixed rate of 4.99 per cent with a £999 fee, if eligible with Nationwide.
On a £200,000 mortgage being repaid over 25 years this will mean paying £1,168 a month.
To put that in perspective, the average two-year fixed rate for a 60 per cent loan-to-value mortgage is 6.35 per cent, according to Moneyfacts.
On a £200,000 mortgage being repaid over 25 year term, that would mean paying £1,332 a month.
For someone with these circumstances it essentially makes Nationwide’s deal £164 less costly each month than the average rate on the market.
Aside from the two-year fix, other notable rate cuts include Nationwide’s five-year fix for first-time buyers which is at 4.67 per cent with a £999 fee.
Nationwide is also now offering a market-leading three-year fixed rate of 4.94 per cent for home movers buying with at least a 40 per cent deposit.
Nicholas Mendes, mortgage technical manager at broker John Charcol, says: ‘It’s been a while since we’ve last seen a two-year fix coupled with a rate that starts with 4 per cent.
‘There has been a fall in gilt yields over recent days which feeds through to swap rates. Lenders have acted quickly with a flurry of repricing between the high street lenders.
‘In view of the above, a 4.49 per cent five year fixed rate mortgage now looks a strong possibility within the next fortnight.’
Mark Harris, chief executive of mortgage broker, SPF Private Clients, believes we may even see five-year fixed rates dip below 4 per cent by the end of the year.
‘Breaking the five per cent barrier is psychologically important and sends the message to borrowers that rates are moving in the right direction,’ says Harris.
‘Swap rates, which underpin the pricing of fixed-rate mortgages, continue to edge downwards so it is possible that we could see a sub-4 per cent five-year fix before the end of the year, particularly if lenders want to drum up some more business ahead of year-end.’
Natiownide’s two-year fixed rate deal is likely to prove popular among borrowers, with many currently hedging their bets on interest rates falling further in the future.
Chris Sykes, technical director at broker Private Finance says: ‘I think this two-year deal represents a real step in the right direction as people are often opting for two-year fixed rates at the moment hoping that the picture is a bit rosier in two years time.
‘It is only 0.06 per cent better than the next best two-year fix, and also is only for sub 60 per cent loans – so it won’t be available for many – but there are other decent two year fixed rates too.’
Aside from trying to attract new customers. Nationwide has also improved rates for its customers who may be coming to the end of their deals.
It is reducing rates across its deals aimed at its existing clientele by up to 0.25 per cent, with rates starting from 4.64 per cent on five-year fixed products, 4.94 per cent for three-year fixed products and 4.99 per cent for two-year fixed products.
These latest changes also continue Nationwide’s existing mortgage member pricing pledge, meaning existing customers will be offered the same or lower than the remortgage equivalents.
Henry Jordan, director of home at Nationwide Building Society, said: ‘We’re making further rate cuts across our fixed rate mortgage range to ensure we continue to cement our position as one of the most competitive lenders in the market.
‘Over the last three months, we have reduced rates eight times and, over that period, that has meant our rates have fallen by up to 1.39 percentage points as we look to maintain our support for potential and existing homeowners, as well as brokers, by offering attractively priced products.’
