close
close
crepo

Best UK mortgage deals of the week

DeMonk

Mortgage rates below 4% are on sale again in the UK, as Nationwide (NBS.L) is now offering a 3.99% deal for new customers looking to borrow up to 60% of the property’s value. NatWest (NWG.L) and Virgin Money (VMUK.L) have also cut their rates ahead of the Bank of England’s (BoE) latest decision on interest rates.

Overall, the average rate for a two-year fixed contract this week was 5.94%, unchanged from last week. Rates for a five-year contract came in at 5.29%, down from 5.32% previously, according to figures from Uswitch.

Nick Mendes of broker John Charcol said: “We can expect the downward trend in fixed interest costs to continue next year as markets price in further cuts in bank rates and lenders take every opportunity to stay ahead of the competition by actively passing on cuts in swaps.”

He thinks that fixed interest rates could be well below 4% in 2025.

“With this in mind, a five-year fixed rate of 3.5% could be within reach early next year,” he said.

The BoE left interest rates unchanged at a 16-year high of 5.25% for the seventh time in a row in June, but markets are hoping for a cut in August, allowing lenders to offer better mortgage deals.

The UK’s second-largest mortgage lender, NatWest, is cutting the cost of its mortgages by up to 0.15 basis points.

Meanwhile, Virgin is cutting interest rates by 0.31 basis points and has launched a number of exclusive deals for people looking to refinance their mortgages.

Read more: How to Manage Your Finances Like an Olympian

Aaron Strutt, managing director at Trinity Financial, said: “NatWest is closing the gap between its competitors with these latest price cuts. The price gap between the cheapest purchase and refinance rates looks set to widen again.” The last time a five-year fixed rate deal priced below 4% was available was at the end of February.

Strutt said lenders were offering buyers lower interest rates because they are “still trying to stimulate the housing market” and they “don’t have to work as hard to get mortgage refinancing.”

Meanwhile, young homebuyers are being forced to gamble with their retirement prospects by taking out mortgages with extremely long terms. Over the past three years, researchers have noted a rise in mortgage terms, locking homeowners into mortgages that extend beyond retirement age. This is particularly widespread among the under-30s, BoE data shows.

Still, the decline in inflation is likely to be welcomed by homeowners and buyers who are pinning their hopes on a rate cut in the summer.

Inflation has fallen back to the BoE’s 2% target for the first time in almost three years, and remained there in June.

Borrowers have long since bid farewell to HSBC’s (HSBA.L) 3.99% for a five-year deal. The cheapest deal at the lender’s table is now 4.14% for five years.

Looking at the two-year options, the lowest rate is 4.54% with a fee of £999, lower than last week’s deal.

In both cases, a mortgage with a loan-to-value (LTV) of 60% is assumed. This means that buyers must make a minimum deposit of 40%.

The lender offers 95% LTV deals, meaning you only need to put down 5% for a deposit. However, the rates are much higher, with a two-year fix at 5.89% or 5.35% for a five-year fix.

This is because the interest rate a person can get is determined by their financial situation and the size of their down payment. The larger the down payment, the lower the LTV, giving buyers access to better deals because lenders consider them less risky.

Read more: What is seller fatigue and how can it impact your real estate purchase or sale?

NatWest has slashed the cost of its two- and five-year fixed rates for home purchases and refinancing. It is offering two-year fixed rates for purchases of 4.48% with a fee of £1,495 (at 60% loan-to-value). The five-year equivalent purchase rate is now 4.03%.

For refinancing borrowers, NatWest is offering two-year fixed rates of 4.54% with a fee of £1,495, or 4.24% over five years. Both deals require borrowers to have at least 40% equity in the property (60% LTV).

The bank has deals with slightly higher rates with a lower fee. For example, the five-year fixed rate for refinancing is 4.29% with a fee of £995 (60% LTV).

At Santander (BNC.L), a five-year fix comes in at 4.13%, assuming you have a 40% deposit. Down from 4.20% last week.

For a two-year contract, the lowest rate customers can get is 4.51%, which is also down from last week’s 4.58%.

Barclays (BARC.L) has a five-year deal for potential homebuyers with a 40% deposit (60% LTV) which works out at 4.04%, with a fee of £899, down from last week’s 4.09%.

Read more: Top tips for investing in a home and the features that make a home sell

For two-year mortgages, the lowest rate you can get is 4.42%. This is also lower than the previous 4.52%.

Nationwide is now offering a five-year fixed rate at a market-leading 3.99% – a reduction of 0.19 percentage points from the previous deal of 4.18%.

The deal has a fee of £1,499 and requires a 40% deposit. It also only applies to loans of £300,000 or more.

Nationwide offers a two-year fixed rate home purchase loan of 4.65% with a £999 fee, even for borrowers with a 40% deposit.

Other offers include:

  • Five year fixed rate of 85% LTV with a return of £999 at 4.55%

  • Two year fixed rate of 85% LTV with a return of £999 at 4.95%

  • Five year fixed rate at 60% LTV with a return of £1,4992 at 4.34%

  • Five year fixed rate of 60% LTV with a return of £999 at 4.39%

Halifax, the UK’s largest mortgage lender, is offering a two-year fixed rate of 4.46% with a £999 fee for first-time home buyers.

The lender, owned by Lloyds (LLOY.L), is charging a rate of 4.06% over five years (also 60% LTV), down from 4.18% last week.

It also offers a 10-year deal with a mortgage rate of 4.93%, all unchanged from last week’s deals.

With only one major lender offering mortgage rates below 4%, it’s clear that Nationwide currently has the cheapest deal on the market.

The 3.99% deal requires a 40% deposit, however, so you’ll need a hefty sum of cash to secure the deal. Halifax comes close, with a 4.06% deal for a five-year fix.

Strutt said: “More lenders are currently cutting their rates to undercut their competitors. This is good news for borrowers looking to get on the property ladder soon or homeowners looking to refinance their mortgage and minimise payment shock.”

Read more: Which scheme for first-time home buyers suits me?

Given that the average house price in the UK is £261,962, a 40% deposit equates to around £105,000.

Borrowers would have to spread their mortgages over more than 70 years to be able to afford the same mortgages as two years ago, banks said.

There is also a new mortgage product that promises to help first-time homebuyers with a deposit of just £5,000. Yorkshire Building Society is offering a deal that will allow first-time homebuyers in England, Scotland and Wales with a deposit of £5,000 to buy a home worth up to £500,000.

This means that first-time home buyers can purchase a home with just a 1% down payment.

Lender April Mortgages is also now offering buyers the chance to borrow up to six times their income on loans that are fixed for five to 15 years, with a 5% deposit. Both solo and joint buyers can apply for a mortgage.

The company, which is part of independent Dutch asset manager DMFCO, offers interest rates from 4.99%, with a registration fee of £195.

Skipton Building Society has also said it will offer first-time homebuyers the opportunity to borrow up to five and a half times their income in a bid to help more borrowers find a home.

Mortgage holders and creditors have been forced to make record repayments in recent years as the UK’s base rate hikes were passed on to customers by banks and building societies. The consensus until now has been that interest rates have peaked and that rates will be cut in 2024 as inflation falls.

But even with inflation back within target, traders are now pricing in only one or two rate cuts, compared to five cuts expected by early 2024.

If the BoE cuts rates this year, mortgage rates will fall, but not as much as expected in 2024. Markets are expecting one rate cut in August and possibly another later this year.

The BoE will announce its decision around midday today.

Approximately 1.6 million existing borrowers have a relatively cheap loan with a fixed interest rate that expires this year.

Download the Yahoo Finance app, available for Apple And Android.

Related Posts