NatWest has significantly intensified the price competition in the fixed-rate mortgage market with its latest move, reducing its headline five-year mortgage deal to 3.89%. This adjustment marks a notable shift as the high street lender becomes the latest institution to offer rates below the 4% threshold, reflecting a broader trend among leading banks and building societies to cut rates aggressively.
This reduction by NatWest follows similar actions by prominent competitors, including Santander, Halifax, and HSBC, which have all recently lowered their mortgage rates. The new rate from NatWest, available for borrowers with a minimum 40% deposit, represents a decrease of 14 basis points from the previous rate of 4.03%. In addition to this lower rate, NatWest has applied a £1,495 fee to the mortgage. The bank has also lowered rates on most other mortgage products by 14 to 20 basis points, aiming to attract more borrowers in a competitive market.
The backdrop for these rate cuts is a significant shift in the financial markets, particularly the City’s wholesale money markets. Recent drops in swap rates—a key indicator of future borrowing costs—have set the stage for this aggressive rate reduction. This market movement follows the Bank of England’s decision earlier this month to cut its benchmark interest rate from 5.25% to 5% for the first time in four years. This reduction was aimed at easing borrowing costs and stimulating economic activity. The upcoming inflation figures for July, due for release on Wednesday, are expected to play a crucial role in determining whether further rate cuts will follow.
Mortgage brokers are optimistic that these rate cuts will have a substantial impact on the property market. As buyers seek to lock in the improved rates, the property market could experience increased activity. Tony Castle, Managing Director at PFG Mortgages, highlighted the positive implications of these rate cuts, describing them as a significant relief for both current homeowners and prospective buyers. He noted that the drop in rates and the renewed market confidence are expected to contribute to a more buoyant housing market.
Riz Malik, Director at R3 Mortgages, also emphasized the importance of the recent rate cuts, noting that they come at a time when market conditions are particularly favorable. He pointed out that with Santander and other lenders also announcing cuts, the mortgage market is seeing a period of competitive pricing. Malik also underscored the critical role that the upcoming inflation data will play in influencing future rate movements, as lenders and borrowers alike will be closely monitoring the data for indications of further changes in monetary policy.
Overall, NatWest’s decision to cut its mortgage rates is part of a broader trend of aggressive rate reductions in the fixed-rate mortgage market. This development is poised to benefit both homeowners looking to refinance and new buyers seeking to enter the market, while also setting the stage for further adjustments based on upcoming economic indicators.