The recent base rate reduction by the Bank of England has led to a significant decrease in mortgage rates, with many lenders now offering the lowest rates seen in nearly two years. This development follows a pricing war among banks and building societies, keen to attract new customers with more affordable mortgage options.
NatWest leads with competitive fixed rates
In response to the Bank of England’s decision to lower the base interest rate from 5.25% to 5%, lenders across the UK have begun reducing their mortgage rates. NatWest is now offering a five-year fixed rate at 3.83%, marking the lowest rate available since late September 2022. According to broker L&C, this rate reduction is a notable shift in the market, which has not seen such low rates since the economic turmoil following the Mini Budget under Liz Truss.
Other major lenders, including Barclays, Halifax, HSBC, and Nationwide, have also reduced their rates. Notably, Nationwide was the first to break the 4% threshold last month, offering a fixed rate of 3.99%. These reductions have made seven of the UK’s ten largest lenders offer fixed-rate deals below 4%.
Challenges remain for variable-rate mortgage holders
While the news is positive for those looking to lock in a fixed-rate mortgage, it is less favourable for the approximately 600,000 homeowners still on standard variable rates (SVR). The average SVR has now climbed to 8.16%, significantly higher than the new fixed-rate offers, leaving many homeowners paying thousands more on their mortgages. The banking trade body UK Finance reports that more than half a million mortgage holders are currently on these deals, underscoring the importance of exploring more competitive options.
Buy-to-let sector sees rate cuts
The buy-to-let market has also seen a shift, with The Mortgage Works (TMW) reducing select rates for new customers. TMW now offers rates starting from 3.49%, with a two-year fixed rate for purchase and remortgage at 4.64% (up to 75% LTV), reduced by 0.10 percentage points. For those seeking longer-term security, TMW’s five-year fixed rate has been adjusted to 4.29% with a £1,495 fee.
Joe Avarne, Senior Manager for Buy-to-Let Mortgages at The Mortgage Works, stated, “The Mortgage Works is committed to providing landlords and brokers a broad range of options to meet their varying needs. These latest reductions continue to make The Mortgage Works one of the most competitive providers of buy-to-let mortgages in the sector.”
As mortgage rates continue to fall, UK landlords and property investors are advised to review their current arrangements and consider the potential benefits of switching to more favourable deals. With market conditions evolving, there are significant opportunities to secure better rates and optimise financial outcomes in the current economic climate.
