More lenders are cutting mortgage deals with rates of close to 3.5 per cent available for many households, starting a “full-scale price war,” according to experts.
High-street lenders have started to cut rates – with particularly large price drops coming for those with large mortgages – and experts say further reductions could be ahead.
It comes two weeks before the Bank of England (BoE) makes its next decision on interest rates, with most economists expecting it will reduce its base rate to 3.75 per cent.
On Friday, Nationwide reduced its mortgage rates by up to 0.21 percentage points, with its lowest rate – for a two-year fixed mortgage with a 40 per cent deposit or equity – now starting at 3.58 per cent.
Its the first time the lender has offered a deal below 3.6 per cent in over three years.
From Tuesday (9 December), Santander is offering an even cheaper rate for some borrowers.
The bank will offer rates as low as 3.51 per cent for those borrowing between £500,000 and £2m.
Again, getting the lowest rate will require borrowers to have a 40 per cent deposit, and it will only be available to those moving home.
Barclays is another major bank cutting rates, and will offer a 3.71 per cent two-year fixed mortgage to those remortgaging, from Tuesday.
NatWest is reducing some of its prices too, with deals starting from as low as 3.62 per cent.
Aaron Strutt, product and communications director at Trinity Financial, said he expected the battle between lenders to continue.
“Santander clearly wants to attract more borrowers seeking mortgages of £500,000 or more and they are likely to get them, with super cheap fixes starting from 3.51 per cent.
“The price war rumbles on and it probably will for the next few weeks.”
Nick Mendes, mortgage technical manager at John Charcol brokers, said: “Santander’s move to 3.51 per cent has very clearly set the pace, and at the moment it is the standout cheapest option for borrowers taking £500,000 or more, once fees are factored in.
“We’re now seeing the first signs of a full-scale price war. NatWest and Barclays have both given notice of further reductions landing tomorrow, and the speed at which these updates are coming through tells you lenders want to be front of mind ahead of the next Bank of England decision.”
Craig Fish, director at Lodestone Mortgages, added: “Over the coming days and weeks I suspect that we will see many more reductions from a whole host of lenders.
“With predictions of base rate dropping to 3 per cent at some point in 2026, it’s highly likely that rates will drop below 3.51 per cent before too long.”
If the Bank does cut interest rates by 0.25 percentage points on 18 December, some mortgage rates would drop immediately.
Tracker mortgages – which follow the Bank’s base rate – would drop 0.25 percentage points, as would most variable deals – though this is at the discretion of the lender.
Fixed mortgages – the most popular type among borrowers – operate a little differently.
If you have a fixed deal, the interest rate on the deal remains the same for a set length of time – usually two or five years.
But, you will be offered a new rate when your term ends and you come to renew.
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Fixed-rate pricing is largely based on swap rates – which follow predictions for where the Bank’s interest rate will go next.
After the Budget, swap rates dropped slightly and some lenders begun cutting rates.
These rate reductions have continued in recent days too.
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