UK mortgage war ‘under way’ as lender offers a fixed-rate mortgage priced at below 5%

For the first time since June, a fixed-rate mortgage priced under 5% has been introduced, following major lenders unveiling a series of home loan rate cuts.

Industry experts highlighted that a competitive battle over mortgage rates is now in full swing. This decrease in rates is expected to encourage borrowers concerned about their current agreements nearing their end, as well as prospective homebuyers who have been hesitant.

Over the past weeks, UK financial institutions have been progressively lowering their rates. In recent days, there’s been a significant number of rate cuts, with more anticipated to roll out on Friday from banks, including Halifax.

The Mortgage Works, a subsidiary of the Nationwide Building Society, rolled out a five-year fixed-rate mortgage at 4.99% on Thursday. Brokers noted this as the inaugural fixed deal under 5% they’ve witnessed in months. It’s believed to be the first such offer since the latter part of June.

According to Moneyfacts, a financial data provider, the average rate for a new five-year fixed-rate mortgage is currently 6.14%. However, there are more competitive deals available: for instance, the lowest-priced residential mortgage with a five-year fixed term was 5.12% on Thursday.

Starting Friday, Halifax is implementing reductions of up to 0.5 percentage points on specific fixed deals. This means their five-year fixed-rate offers will start at 5.15%.

The Mortgage Works will also decrease their rates by as much as 0.5 percentage points, beginning Thursday. Brokers have also mentioned anticipated rate cuts by the Coventry Building Society on Friday.

Such actions follow recent rate reductions by other major lenders. For instance, on Wednesday, Nationwide cut several of its fixed rates by up to 0.29 percentage points. Similarly, Santander lowered certain new fixed rates by up to 0.14 percentage points on the same day.

Despite months of escalating mortgage costs, UK lenders began slashing rates in late July. This shift occurred after data showed that UK inflation in June had decreased more than anticipated.

Next week’s potential rate increase by the Bank of England, set to be announced on 21 September, might stall further reductions. The current base rate stands at 5.25%, with several analysts predicting it to reach 5.5%.

Amit Patel from Trinity Finance commented, “After a challenging summer, it seems we’re heading in a positive direction as autumn approaches.”

Diarmuid Phoenix of Mint Mortgages & Protection noted, “The resurgence of rates below the 5% mark, alongside decreasing swap rates, could instil more confidence in borrowers concerned about their expiring fixed-rate agreements. It might also encourage those waiting for rates to decrease before making a purchase.”

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