‘Watershed moment’: Nationwide cuts mortgage rates to sub-five per cent – while arrears keep climbing
Nationwide has launched the first two-year fixed mortgage below five per cent since June as lenders face pressure to offer better deals in a fiercely competitive market.
Mortgage rates are slowly moving downwards across the board as lenders struggle with weak demand for home loans.
However, many landlords are still falling behind on their payments as latest figures from UK Finance show the number of mortgages in arrears rose in the third quarter, driven by record-high interest rates.
Brokers said Nationwide’s 4.99 per cent deal, down 0.25 per cent from its previous rate, gives more stability to the mortgage and housing markets.
The deal comes in 1.22 per cent below the average two-year rate of 6.22%, according to Moneyfacts.
The offer, available from Thursday, requires customers to have a 40 per cent stake in their home.
Lewis Shaw, owner of Shaw Financial Services, described the offer as a “watershed moment” and “glimmer of light in what is still a very long tunnel”.
Ross Murphy, a senior adviser at Capricorn Financial Consultancy, told CityAM that the deal was “a landmark move for the market and likely to be a catalyst for further competition on pricing”.
He noted that a rally in gilt yields following the Bank of England’s decision to hold interest rates at a record high last week had a positive effect on the swaps market, which largely determines the pricing of mortgage products.
“I would be highly surprised if we didn’t see further lenders sharpen their pencils on pricing in the coming days, not just on two-year fixes but across the board, as they look to retain and win new business,” Murphy said.
Latest figures from Halifax show the cost of a home rose 1.1 per cent in October, breaking a run of six consecutive monthly falls.
Meanwhile, UK Finance reported on Thursday that there were 87,930 mortgages in arrears of 2.5 per cent or more of their outstanding balance in the third quarter, up 7 per cent from the previous quarter.
The number of buy-to-let mortgages in arrears of at least 2.5 per cent surged by almost a third (29 per cent) to 11,540 between July and September.
“This is a worrying change, and from speaking to lenders it is also only the start of it,” Chris Sykes, technical director at Private Finance, told CityAM
“Things like the mortgage charter go some way towards this commitment but talking with lenders they are genuinely wanting to work with borrowers where possible to make sure they make payments where they can and have a roof over their head.”
UK Finance’s figures also showed that the number of mortgaged properties taken into possession rose by nine per cent.