Nationwide has launched a new fixed rate mortgage deal for 3.99 per cent.
It is the first major high street lender to offer a rate of below 4 per cent as the mortgage price war continues.
The deal is a five-year fixed rate for people with a 40 per cent deposit with a £1,499 fee at 3.99 per cent, reduced by 0.19 per cent.
However, the deal is for new customers moving home. First-time buyers and those remortgaging with Nationwide will pay more.
Aaron Strutt of brokers Trinity Financial said: “It has taken a while but we finally have a 3.99 per cent five-year fix and even a two-year fix priced at 4.41 per cent.
“The lenders have been gradually lowering their rates for a while and as a result of these pretty regularly changes rates are much better value for money than they were. These cheaper rates are due to a combination of competition in the market and lower funding costs. Lenders want to issue more mortgages now so they can build up a strong pipeline of completions.
“The lenders are still trying to stimulate the property market and that’s why they have cheaper purchase rates. They do not need to work quite so hard to get remortgages business because there are so many borrowers that need to switch deals before the end of this year.”
HSBC also cut rates today, with reductions of 0.19 per cent, the third time it has cut in a month.
Smaller lender, Gen H, has also cut rates by up to 0.3 per cent.
All of these rate reductions mean that many homeowners are not facing such a large repayment shock when they come to remortgage as lots of unlucky people did.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Fixed mortgage rates are on the downward trend, which will be a relief to borrowers looking to refinance.
“There is still much more room for improvement, but it has taken a few months for the lowest fixed mortgage rates to drop below the 4 per cent mark.
“As it stands five-year fixed mortgages are lower than a two-year equivalent, so any borrowers unsure on which to choose would be wise to seek advice to go through their options.”
Last week, NatWest cut rates by 0.23 per cent, following Santander, Virgin Money and Clydesdale Bank.
Three weeks ago, the average two-year fixed mortgage was 5.97 per cent, and the average five-year deal was 5.53 per cent. Now it is 5.81 per cent and 5.41 per cent, respectively.
The reductions come the week before the Bank of England decides whether to cut interest rates from the current 16-year high of 5.25 per cent.
Most economists believe it will stay at its current rate with some property experts suggesting it is surprising that providers are cutting rates as much as they have.
Hina Bhudia, partner at Knight Frank Finance, said: “These cuts are fairly surprising given the fact that key inflation data isn’t easing as quickly as policymakers would like. The lenders’ margins are already wafer thin, but it demonstrates just how eager they are to catch up after months of activity that has failed to live up to expectations.
“This is why we expect mortgage rates to ease quite quickly once we do get a meaningful shift in the inflation narrative.”
However, there are hopes from some experts that the Bank could decide to cut to 5 per cent.
Mortgage rates have been cut following a dip in swap rates. Many lenders cut mortgage rates following the stability of swap rates which are based on long-term predictions for where the Bank’s base rate – the interest the Bank charges on its lending to commercial banks – will go in the future.
Ms Springall added: “Since the start of 2024, mortgage rates have been volatile, and in the past few weeks lenders have been reacting to changing swap rates. Mortgage rates could fall further, but it is difficult to tell how quickly and by what margins.
“Typically, a brand with a large presence in the market that cuts rates can encourage other lenders to review their rates to compete, so as the lowest five-year rates have edged closer to 4 per cent from some of the biggest high street brands, the market did appear on course to reveal a sub-4 per cent deal.”
Experts have suggested that those unsure on whether to fix now or wait could lock in a deal early as some lenders will let borrowers do this from three to six months in advance.