Nationwide has cut mortgage prices, with its lowest rate now at 4.19 per cent, as it competes for more customers.
The deal – a two-year fix for those moving home with a 40 per cent deposit – is the lowest fixed mortgage rate seen since March. Customers will also have to pay a fee of £1,499.
The building society has cut multiple other deals too by up to 0.25 percentage points, following other lenders that have reduced prices in the past two weeks, including Barclays.
Prices are still well above the rates they were in February before the war in Iran started, but reductions have been steady over the last two months as oil prices have reduced and multiple Bank of England interest rate hikes in 2026 appear less likely.
But is there any space for further cuts, or have rates bottomed out for now?
How low have rates gone?
Different customers are offered different mortgage rates depending on the length of fix they take, the size of their mortgage, and the size of their equity or deposit.
Though Nationwide’s 4.19 per cent rate is available to some customers, average mortgage rates for a two-year fix are now at 5.55 per cent, according to data firm Moneyfacts.
This compares to 5.89 per cent at their peak in April, but 4.83 per cent in the last week of February, before the Iran war begun and sent inflation and interest rate predictions higher.
Nationwide’s five year fixes now start from 4.31 per cent whilst the average five year mortgage is 5.54 per cent.
Lenders have cut rates since a peace deal was agreed last week – which included an agreement to reopen the Strait of Hormutz through which a large portion of the world’s oil passes – though at times the stability of the agreement has looked shaky.
Last weekend, Iran said the Strait had been closed, though some ships appeared to still be passing through it.
Can rates go lower at the moment?
Fixed mortgage rates are heavily determined by swap rates, which are based upon longer-term predictions for where interest rates will go in the future.
Experts say at the moment, it is difficult for lenders to cut rates much below 4.19 per cent without these swap rates dipping.
Nick Mendes, head of marketing at John Charcol brokers, explained: “A fixed rate of 4.19 per cent sits only around a quarter of a point above the cost of funding, and lenders need a margin above swaps to cover risk, capital, and service, so the space for further large cuts at this level is limited unless swaps fall again.”
He said some other lenders might have scope to reduce their rates if they were significantly above the best deals on the market.
“Other lenders can match this level, and several are likely to over the coming days.
“Lenders have shown in the past how willing they are to test themselves and cut to finer margins in order to win business and build their back book quickly, so further reductions cannot be ruled out, but at these swap levels the next meaningful cuts depends on the swaps moving rather than on appetite,” he said.
Mortgage brokers said if the peace deal in the Middle East did continue, then further reductions were possible later in summer.
Lewis Shaw, at broker at Shaw Financial Services, said: “If the US-Iran peace deal holds, oil stays around current levels or eases further, and swap rates keep falling, lenders will start scrapping for business during the summer lull.
“Most will be heading into the third quarter of the year having missed their targets, and nothing sharpens a lender’s pencil quite like a number they’ve fallen short on.”
Aaron Strutt, a broker at Trinity Financial, warned that a new prime minister could push up mortgage rates.
“There is always a risk that a new prime minister or change of political direction pushes up mortgage costs, and if the market start to get worried about Andy Burnham then fixes could get more expensive again.”
What should you do if you’re remortgaging this year?
If you are coming up to your mortgage deal ending, brokers generally suggest looking at new deals three to six months beforehand, as most lenders will let you lock in a rate.
If rates fall, you can port to a new deal with the same lender – generally without a full new application – but if they go up, you’ll be safely on the lower rate.
Another option is to go for a tracker mortgage, which follows the Bank of England base rate – currently 3.75 per cent – plus a percentage on top.
Theses are generally cheaper than fixed mortgages at the moment, though if the Bank raises interest rates, your cost will go up.
“The best trackers are starting from 3.96 per cent but they seems to be getting closer every few days with all of these rate cuts,” said Strutt.
“The best two, three and five-year fixes are all priced around 4.3 per cent, which offers good value for money, but hopefully, we will get back to the magical sub-4 per cent fixes soon if things continue as they are at the moment,” he added.
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