The Nationwide Group is the first major lender to offer a mortgage for five years at a rate of less than 4 percent in recent months. Lower borrowing costs have injected optimism into the housing sector.
The building society announced that it will reduce the interest rates on a variety of loans as of Wednesday. The building society’s fixed five-year rate for borrowers who have at least a 40% deposit will drop by 0.19 percentage point to 3.99 per cent.
Brokers have identified the return of mainstream lending rates starting at a 3 as a significant milestone in the market that may encourage more buyers to make purchases.
Brokers anticipate that other lenders will follow suit soon in order to compete with borrowers for their business.
Nicholas Mendes is a mortgage technical manager with John Charcol. He said, “Nationwide was the first lender that finally broke the 4 percent benchmark after recent weeks of downward repricing.”
He added, “This is great news for borrowers. It’s a major change in the landscape of mortgages after recent months with increased rates.”
Moneyfacts reports that most major lenders increased their rates during February, as the market’s expectations of interest rates changed. The final comparable deal under 4 percent was pulled in April.
Markets expect the Bank of England to cut its benchmark rate from 5.25 percent, a record high for 16 years, in August or September.
Nationwide’s 3.99 percent rate is only available for home buyers. Customers who are switching from a fixed-rate contract will have to pay a fee of £1,499.
Aaron Strutt said that lenders are offering lower rates because they’re “still trying” to stimulate the real estate market and “doesn’t need to work as hard to get remortgage businesses”.
In June, the BoE warned that millions homeowners who have mortgages still had lower fixed-rate deals and therefore were not affected by higher rates.
The property market will be stimulated by lower rates. It has slowly recovered from a 10-year-low in home sales. Since 2022, the sharp increase in interest rates has made it difficult for buyers to obtain loans and impacted transaction numbers.
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