Britain's largest building society, Nationwide, is lowering mortgage rates to as little as 3.89 per cent in a move that could have a significant impact on borrowers.
The reduced rates, effective from Wednesday, apply to select two, three and five-year fixed-rate mortgages for both first-time buyers and existing homeowners. These cuts of up to 0.25 percentage points could make home ownership more accessible and potentially allow borrowers to secure larger loans.
The deals will include a two-year or five-year fixed rate at 3.89 per cent for borrowers with a 40 per cent deposit, with a £1,499 fee. This is available to existing and new Nationwide customers who are moving home.
A first-time buyer two-year fixed-rate mortgage will also be offered at 4.09 per cent, for borrowers with a 40 per cent deposit, with a £1,499 fee.
The cuts were announced as both HSBC UK and First Direct announced changes to stress rates used in their affordability calculations, which could increase some people’s ability to borrow.
Stress rates are used to check whether borrowers will still be able to afford their mortgage if rates increase.
HSBC UK estimated the move could enable 20,000 more customers to get a mortgage with it, alongside being able to borrow larger amounts as part of a mortgage. It said its changes will benefit both purchase and remortgage applications across its product range.
Where offers increase for first-time buyers, the average increase in offer will be £39,000, the bank said.
Oli O’Donoghue, HSBC UK’s head of mortgages, said: “By carefully reviewing our affordability calculations, allowing more customers to meet affordability criteria and potentially access increased borrowing amounts, we are aiming to ease some of the pressure on prospective buyers.”
First Direct said its stress rate changes could benefit around 85 per cent of mortgage applicants, allowing them to borrow an average of £22,000 more.
The lender is also applying a range of rate reductions of up to 0.14 percentage points across more than 100 products.
Liam O’Hara, head of mortgages at First Direct, said: “The changes will benefit the vast majority of our existing customer base when they decide to remortgage or take out a new product.
“On top of this, we are pleased to be applying more reductions to our rates.”
More widely in the mortgage market, the Financial Conduct Authority (FCA) is currently looking at its expectations for mortgage lending as part of proposals to streamline its rules, which could make it easier for more people to access home loans.
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