New
Two Major Banks Launch Sub 4% Mortgage In 2025 As Lenders Ignite Fresh Rate Battle
TWO major banks have launched sub 4% mortgages as lenders ignite a fresh rate battle.
Mortgage rates had dipped below 4% earlier this year, but deals were later pulled in the face of rising inflation.
GettyMajor banks have launched more competitive rates as confidence appears to grow[/caption]Despite this, and in a positive sign for homeowners, Nationwide launched a sub 4% mortgage on Friday, with Barclays following in its footsteps and announcing a new product would be available from tomorrow (Tuesday March 4).
On Friday Nationwide reduced mortgage rates to as low as 3.99% for existing customers looking to move to a new deal and new customers who are remortgaging.
From tomorrow Barclays will also be offering a sub 4% deal, with five-year fixed rates as low as 3.96%.
Barclays’ market-leading 3.96% rate will be on a Green Home mortgage, which is available to customers who are buying an energy-efficient new-build home directly from the builder or developer.
To take advantage of the deal borrowers must have 60% loan-to-value (LTV) and pay a £899 product fee.
The LTV is the ratio of how much you are borrowing compared to the value of your property.
For example, for a property valued at £250,000 you’d have 60% LTV if your mortgage was £150,000.
Other deals in Barclay’s refreshed range include a two-year fixed-rate for borrowers with a 10% deposit, at 4.93%, with no product fee.
Nationwide’s new rates included a “switcher” mortgage for existing customers who are coming to the end of their current deal at 3.99%, for a five-year term.
The deal requires a 60% LTV and comes with a £999 product fee.
The building society is also offering a 3.99% rate on a five-year deal for borrowers with a 60% LTV who are looking to remortgage.
That deal is subject to a £1,499 fee.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said the deals suggested the “ongoing [rate] trajectory is downwards”.
He suggested that Santander had pulled sub 4% rates last month after other banks failed to follow in its footsteps, but with both Nationwide and Barclays offering better deals they could stick around for longer.
Mark added: “If we see the likes of Barclays and other big lenders such as Nationwide and HSBC share the business around, then subject to swaps not increasing again, we would expect these cheaper deals to stick around for a while and for other lenders to follow suit.
“We could even see lenders outside of the ‘big six’ join in with a market-leading deal, before pulling out once they’ve taken a slice of the pie.”
However, Nicholas Mendes, head of marketing at John Charcol, suggested lenders were still feeling cautious and “face constraints in comfortably introducing sub-4% deals”.
He advised borrowers to carefully weigh-up deals.
He said: “Borrowers should focus on the total cost of the mortgage rather than just the headline rate, as a lower rate with high fees may not always be the best value.
“While further reductions in fixed rates are possible, much depends on how swap rates evolve and whether lenders see sufficient margin to cut rates further without taking on excessive risk.”
Nicholas did have some good news for those looking to renew or take out a new deal this year.
He suggested that by the end of the year two-year fixed deals with a 60% LTV could be available at about 3.5%, with five year deals available at about 3.6%.
Generally the lower the LTV the better rates available on mortgages and the latest offers below 4% are reserved for those with an LTV of at least 60%.
This means first-time buyers – who typically have a 90% or 95% LTV – won’t be able to take advantage of them.
However, both banks also reduced rates for first-time buyers, with Nationwide’s falling by up to 0.25%.
Barclays has also increased the maximum loan amount for 90% LTV purchases for houses and flats.
The cap for houses has increased from £570,000 to £640,000 while the cap for flats has increased from £275,000 to £310,000.
Matt Smith, a mortgage expert at Rightmove, suggested the strength of the property market was driving the changes.
He said: “It shows that mortgage lenders are still keen to compete for business as we head into the thick of the annual spring selling season.
“However, as we have recently seen, these cheapest rates are susceptible to changing market conditions and we’ll have to see how the market reacts to upcoming economic news.”
February’s sub-4% rates had followed a cut in the Bank of England base rate, from 4.75% to 4.5%, which fuelled hopes that competition between lenders could heat up.
However a surprise rise in inflation hit confidence and those rates did not stick around for long.
The Bank of England will meet again on March 20 to decide whether the base rate should be cut again, which could impact rates offered again.
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.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories
