NatWest has just announced that it will be reducing some of its fixed rate deals tomorrow meaning its range will include a two-year deal at 5.04% and a five-year lock-in at 4.98%. This will provide another much-needed option in the sub-5% mortgage market.
Meanwhile, brokers expect HSBC’s cuts, which take effect tomorrow, to include some new interest rates below 5%.
These cuts come after Santander, Halifax and Yorkshire Building Society made cuts last week. But they also come with increased financing costs for lenders, meaning these decisions to cut interest rates are likely to be competitive maneuvers.
Nicholas Mendes, technical director of mortgages at John Charcol, explained: “Two-year swap rates have risen from 4.545% to 4.641% over the past month, so NatWest is lowering them at a time when its funding costs are higher, not lower.
“This indicates a clear desire to compete for business, particularly with demand for remortgages increasing as many borrowers reach the end of fixed interest rates over the coming months.
“Borrowing costs remain well above the levels seen earlier this year, so these cuts ease some pressures without changing the broader picture, and swap rates will continue to set the trend once markets digest the budget.”
What is the average mortgage rate today?
The average two-year fixed-rate mortgage is currently 5.96%, down from 5.98% last Monday. Meanwhile, the typical five-year mortgage rate fell from a high of 6% last Monday to 5.99% today, according to data from Moneyfactscompare.co.uk.
But despite these small rate cuts, which will be welcomed by borrowers, the cost of mortgages is still high compared to the beginning of the year.
“These changes will come as welcome news to those looking for the best buyout deals, but unfortunately, these reforms are still well above what many borrowers are willing to pay for their mortgage,” said Aaron Strout, director of product and communications at Trinity Financial.
What does this mean for mortgage borrowers?
If you’re looking for a mortgage right now, today’s rate cuts will come as good news. It is recommended that you speak to a broker, who will be able to look at all the options available in the entire market and find a deal that suits your circumstances.
Mendes explained that NatWest’s discounts will provide some strong options for existing customers switching to a new deal with the lender.
“Existing NatWest customers approaching the end of the fixed rate will see the benefit through new product throughput rates, although comparing it to the wider market remains important as rates continue to shift from week to week,” he said.
“Someone who already has a mortgage offer can often move to a lower rate with the same lender before finalizing, so getting a deal now doesn’t mean missing out on further reductions.”
