Nationwide ha thrown down the mortgage gauntlet to its rivals by offering an interest rate below 4% ahead of the Bank of England’s rate decision next week.
Britain’s biggest building society will reduce its five-year fixed mortgages for new customers moving home with a 40% deposit, to a rate of 3.99%.
Other lenders have been cutting their rates ahead of what is expected to be a cut in the base rate in August. It currently stands at a 16-year high of 5.25%, but inflation has fallen to the Bank’s 2% target and pressure is mounting for a cut to help the fragile economic recovery.
About 1.6 million existing borrowers may benefit from the lower rates as they will be looking to re-mortgage as their current fixed-rate deals expire. Some are moving off a rate of less than 2% arranged during the years of cheap borrowing costs.
NatWest, trading as Royal Bank of Scotland north of the border, is lowering a number of products by up to 0.23 percentage points and TSB is cutting deals by up to 0.15 percentage points. Barclays, Halifax, Nationwide, HSBC and Santander, among others, have slashed mortgage rates in recent weeks.
TSB yesterday revealed that its profits dropped by almost a quarter during the past half-year, due to weakness in the mortgage market.
The bank reported a pre-tax profit of £111.6m for the six months to June; down 24.5% against the same period a year earlier.
TSB said this was due to lower income, which fell by 6.1% to £548.7m for the half-year.
Income was impacted by lower mortgage margins due to “challenging” market conditions in the face of high interest rates, while it also paid out significantly more interest to its savings customers.
