Full list of major lenders offering sub 4% mortgages as banks battle it out for lowest rates
MAJOR lenders are battling it out to offer lower rates in a boost for homeowners and first-time buyers who have been hit by soaring costs.
A flurry of mortgages have hit the market with interest below 4% after the Bank of England (BoE) last week slashed the base rate.
The key benchmark is used by high street banks to set the interest rates it offers customers on a range of products, including mortgages.
The BoE reduced the rate from a 16-year high of 5.25% to 5% spurring lenders to slash rates for some borrowers.
Fixed rate mortgages had not been under 4% since the start of the year.
Nationwide fired the starting gun in July by offering 3.99% on a five-year fix with a 40% deposit, including a £1,499 fee, in anticipation of the BoE cut.
Now, others have followed suit going as low as 3.84% – and there could be more to come after the UK’s biggest lender Halifax announced a sub-4% deal.
The move will come as a huge relief for many homeowners coming off fixes who have faced far higher rates since the last time they locked in.
A fixed rate is when you agree to a set rate for a set period of time, typically two or five years.
This means that your repayments won’t change during that time.
Borrowers won’t pay more if the BoE hikes rates, but they won’t pay less if rates drops.
The base rate was at a historic low of just 0.1% until December 2021, after which the BoE has steadily increased it to tackle soaring inflation.
The average two-year fix was 2.34% and five-year fix 2.64% in December 2021, according to Moneyfacts.
Average rates have hit over 6% since then at various times, but currently the average mortgage rate is 5.74% for a two-year and 5.36% for a five year deal.
Rachel Springall, a finance expert at Moneyfacts said: “It’s a promising sign for borrowers to see more rate cuts by some of the biggest lenders in the country as they are in close competition to entice new business.
“Barclays Mortgages has undercut the competition on initial rate, but we could well see more cuts on the horizon.
“Swap rates (which are used by lenders to price deals) are lower than what they were a month ago, and this, coupled with the recent base rate cut, can encourage lenders to bring mortgage rates down.
FIXED RATE DILEMMA
Many homeowners have faced the dilemma of whether to fix at higher rates, or wait it out in anticipation of them going down, either by moving on to lenders’ standard variable rate or a tracker.
Variable or reversion rates can change at any time and can be as high as 8%.
Trackers are linked to the base rate and change when the base rate does.
According to bank industry group UK Finance, around 700,000 households are on fixed rates due to end in the second half of the year.
Around 643,000 are on trackers and 624,000 in standard variable rates (SVRs).
Springall said “Those borrowers who have been holding out to refinance would be wise to seek advice to explore the new deals available to them and select a deal which offers the best value on a ‘true cost’ basis.
Meanwhile high rates have put off first-time buyers from getting on the property ladder.
They may still face a longer wait though, as the mortgage products with the lowest rates are so far reserved for those with a bigger deposit of 40%.
Ken James, director at Contractor Mortgage Services said: “Let’s hope with the market shift looking much more positive, some of these lenders grab the bull by the horns and start lowering the higher loan to value rates.”
Andrew Montlake, managing director at Coreco, said the raft of cuts “are really starting to drive demand and the prospects for the second half of the year look very promising”.
Here are the major lenders offering mortgage rates below 4%.
It’s also wroth remembering that although the rate is on offer, what you can get also depends on your own circumstances like income, outgoings and credit history.
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
NATWEST
Natwest is offering a five-year fixed rate at 3.97% at 60% loan to value (LTV).
LTV is the percentage of the property value covered by the mortgage.
For examples on a £250,000 home an LTV of 60% would mean £150,000 is covered by the mortgage and £100,000 from a deposit or equity if remortgaging.
There’s a £1,495 fee on the deal which is available online only and directly from the bank, not via brokers.
A broker can help you secure the best deal on your mortgage, and may have access to preferential rates not available on the market, but you usually have to pay a fee.
This deal is for first-time buyers and home movers, but not for those remortgaging.
Nicholas Mendes, mortgage technical manager, at John Charcoal, said the Natwest deal could be attractive for those wanting to budget.
He told The Sun: “The fixed rate for five years offers stability in monthly payments, which can be particularly attractive for those looking to manage their budgets, stability can make financial planning easier and provide peace of mind for homeowners.”
HALIFAX
Halifax is the latest lender to announce rate drops below 4% – though it’s not as low as others.
It’s offering a five-year fix for 3.99% with a 60% LTV. There’s a fee of £999.
The deal is for home movers and first-time buyers, though they will need a large deposit of 40%.
Darryl Dhoffer, mortgage broker at The Mortgage Expert said: “Some may say based on bigger reductions from their competitors, it’s like throwing a pillow in a heavyweight bout, but history tells us that the Halifax stay the distance when other lenders may withdraw rates at the toss of a coin.”
BARCLAYS
Barclays has today launched a five-year fixed mortgage with a market-leading 3.84% rate.
It also has a 60% LTV and comes with a product fee of of £899. Previously the rate for this stood at 4.03%.
Only buyers making a purchase will be able to access this rate, so it’s not for those remortgaging.
But Barclays has also lowered rates on dozens of other mortgages for those remortgaging, as well as buyers, at a range of LTVs up to 85% and both two and five year terms.
For example a two-year fix at a 75% LTV and with a £999 product fee has dropped from 4.85% to 4.65%, though no others are yet under 4%.
Mendes said: “The significant aspect of Barclays’ offer is the combination of a low rate and a manageable fee, making this deal highly attractive.
HSBC
HSBC has launched a five-year fixed mortgage with a 3.95% rate.
Again, this one is for those with an LTV of 60%, and it comes with a product fee of £999.
This deal is for existing customers only, but other mortgage rates have also gone down at the bank for first-time buyers and those remortgaging across.
That’s across two and five-year terms and a range of LTVs up to 90%, though no others are below 4%.
NATIONWIDE
Nationwide is offering a five-year fixed rate of 3.99%, also with a 60% LTV.
It has a £1,499 fee and is for new customers moving home, not for existing customers moving house, or those remortgaging.
The lender has also dropped rates by up to 0.25% across its two, three and five-year fixed rate mortgage products.
At the time of the rate reduction on Jul 23, said it signalled a “change in the mortgage landscape”.