There is talk of ‘momentum’
Nationwide and Virgin have followed NatWest, Santander and a host of other lenders in reducing their mortgage rates on Monday. While brokers said lenders appear to getting more confident, they also warned that borrowers should see this as “positive momentum rather than a guarantee cheaper deals will keep coming”.
From tomorrow, Nationwide is reducing selected fixed rates across its First Time Buyer, Home Mover, Existing Customers Moving Home and Remortgage product ranges by up to 0.36%. Virgin has also announced some “pretty large” rate cuts, according to one broker.
Across its Purchase range, two-year fixed rates will be reduced by up to 0.26%, five-year fixed rates by up to 0.24% and Shared Ownership fixed rates by up to 0.26%. On the remortgage front, two-year Virgin fixed rates will be reduced by up to 0.24% and five-year fixed rates by up to 0.10%.
Carlo Pileggi, head of mortgage products at Nationwide, said: “We’re pleased to be cutting our mortgage rates once again, with the biggest reductions this time aimed at first-time buyers. Some of our biggest rate cuts are being made on our higher loan-to-value mortgages, which will help those with smaller deposits to take their first step on to the property ladder.”
Brokers embraced the cuts but cautioned that conditions remain volatile.
Nouran Moustafa, practice principal and IFA at Roxton Wealth, said: “These cuts are welcome, but borrowers should not assume they are guaranteed to last. Mortgage pricing is not only about lender appetite, but is influenced by swap rates, gilt yields and expectations around inflation and the Bank of England base rate.
“If geopolitical tensions escalate and oil prices move higher, that can quickly feed back into inflation fears and make markets more nervous. That is where cuts become fragile. I do not think borrowers should panic, but I also would not wait forever for a perfect rate.
“If a deal works for someone’s budget and circumstances, it may be sensible to secure it, particularly where the lender allows a product switch before completion if pricing improves. The market is moving in the right direction, but still sensitive to global shocks.
“Virgin, Nationwide, NatWest and Santander cutting rates is encouraging, but until inflation and geopolitical risks calm down, borrowers should see this as positive momentum rather than a guarantee cheaper deals will keep coming.”
Emma Jones, managing director at Runcorn-based Whenthebanksaysno.co.uk, agreed that the current rate trajectory was by no means set in stone: “Last week’s momentum has continued into this week, despite no clear evidence that the Middle East conflict is close to being resolved.
“Lenders appear more confident, but people considering buying or remortgaging should not get complacent and assume rates will continue to fall because we have seen how quickly things can turn in recent months.”
Omer Mehmet, managing director at Welling-based Trinity Finance, echoed that sentiment: “You sense that lenders are keen to boost their business volumes right now, as the way rates are being cut does not entirely sync with geopolitical events, which remain uncertain.”
Dariusz Karpowicz, director at Doncaster-based Albion Financial Advice, described the cuts as “genuinely good news”. He continued: “Lenders are clearly competing again rather than nibbling at the edges, and borrowers on shorter fixes will feel the sharpest benefit.
“That said, Trump calling Iran’s response to his peace plan “totally unacceptable” overnight is exactly the sort of headline that rattles swap rates. Oil spikes feed inflation fears, and inflation fears feed pricing.”
Aaron Strutt, product and communications director at London-based Trinity Financial, described the cuts as “pretty large”, but also sounded a cautious note.
He said: “It is hard to predict exactly what will happen in the mortgage market over the short term due to the ongoing fluctuating funding costs. Thankfully, there are more lenders offering two-year fixes below 4.5% now and five-year fixes priced at 4.70% or slightly lower.
“The good news is that rates are reasonably priced again in general and the anticipated pricing hikes have not happened yet. HSBC is topping the mortgage best buy tables at the moment.”
Andrew Montlake, CEO at London-based Coreco, a broker, said borrowers would welcome these cuts even though rates are still higher than they were before the war in the Middle East.
He continued: “There’s still quite some way to go before we return to the level rates were at before the conflict, but for now mortgage rates are moving in the right direction, and for some borrowers the reductions now emerging will help ease some of the pressure.”
