Nationwide Building Society is reducing rates across the majority of its fixed mortgages by up to 0.45 percentage points, from tomorrow.
Its latest cuts will result in two new best buys, available to those who are moving home and switching from another lender to Nationwide.
Nationwide’s cheapest five-year fix has fallen by 0.2 percentage points to 4.74 per cent, with a £999 arrangement fee.
This is available to home movers with a deposit of at least 40 per cent (60 per cent loan-to-value).
Rate cut: Nationwide has announced another round of cuts to many of its mortgage products
Someone moving home with a £200,000 mortgage being repaid over a 25-year term would have monthly payments of £1,139 on Nationwide deal. not including the fee.
The average five-year fixed rate in the UK is currently 5.96 per cent, according to Moneyfacts.
This means someone with a £200,000 mortgage and a 25 year term would end up paying £1,284 a month, making the Nationwide deal some £145 cheaper each month than the average.
> Find the best mortgage rates you could apply for
Nationwide is also launching a new best buy three-year fixed rate mortgage for home movers, charging 4.99 per cent. This deal is 0.45 percentage points below what Nationwide previously offered.
Once again it will be available to those buying with at least a 40 per cent deposit.
First-time buyers that are able to purchase with at least a 40 per cent deposit will also be able to secure a rate of 4.84 per cent with Nationwide, if fixing for five years.
Those needing to remortgage will be able to apply for a 4.89 per cent five-year fixed rate with Nationwide, as long as the mortgage amount is no more than 60 per cent of the property’s value.
A two-year rate is available at 5.59 per cent, for those with at least a 25 per cent deposit.
Nicholas Mendes, mortgage technical manager at John Charcol says: ‘Each week we are seeing lenders continuing to reprice their fixed rate products which show no signs of slowing down for the next few weeks.
‘We are starting to see the repricing typically around 0.25 per cent to 0.5 per cent, rather than the nominal 0.10 per cent meaningless reductions.
‘In September, I felt there was margin for lenders to come down to 4.5 per cent on five year fixed rates by the end of October, but we have seen lenders like Skipton show innovative ways of creating a headline rate but higher arrangement fees to compensate.’
Two year fixes remain more expensive
Before interest rates began to rise last year, two-year fixed rate mortgages tended to be cheaper than five-year fixes.
This is no longer the case, though two-year fixes are proving increasingly popular among borrowers, because they think interest rates will fall over the next two years.
Nationwide’s best two-year fix for first-time buyers will be 5.74 per cent from tomorrow.
Those remortgaging will be able to secure as low as 5.59 per cent when fixing for two years.
There are lower two-year fixes available across the wider market. For example, Halifax has a 5.32 per cent deal and HSBC has a 5.34 per cent deal.
Yesterday, Skipton Building Society launched a number of two-year fixes ranging between 3.59 per cent and 3.35 per cent, but with a hefty 5 per cent mortgage arrangement fee.
The market average for two-year fixes, according to Moneyfacts, is currently a 6.41 per cent.
Past the peak? Average fixed mortgage rates appear to be falling back somewhat after a barrage of rate hikes during the first half of the year
This is a result of swap rates which essentially show what lenders are expecting interest rates to do in the future.
Swap rates are when two parties swap interest rate payments for another. One party agrees to receive a fixed-rate payment, while the other receives a variable payment.
In the case of mortgages, it is what lenders pay to financial institutions to acquire fixed funding for a set period of time.
They can be on a number of terms, including one, two, three, five and 10-year terms, and the cost is used to price mortgage product for lenders.
Mendes adds: ‘As swap rates are based on what the markets think interest rates will be, if they rise then mortgage lenders will increase their pricing to maintain their profit margin, or if they rise too rapidly then they may have to pause lending or withdraw products until pricing stabilises.
‘Markets currently pricing in higher rates in the short term, swaps currently on two year money is 5.05 per cent, compared with three year money at 4.81 per cent and five year money are 4.54 per cent.
‘As a result, two-year fixed rates are priced higher than five-year fixed rates.’
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