Homeowners now able to lock in for the long term at sub-1% as rate war intensifies

Homeowners can now switch to a sub-1% fixed rate for five years, thanks to a new range of products launched by Nationwide this week.

The society has overhauled its range of mortgages to introduce a market leading 0.99% 5-year fixed rate, amongst a suite of new products that include a new three-year fixed rate.

“We are launching the sub-1% five-year fixed-rate mortgage for both new customers and existing members either moving home or switching product, something we feel will give them greater certainty over their payments for a longer period” said Henry Jordan, Director of Mortgages at Nationwide.

HSBC recently launched their lowest ever fixed rate at 0.94%, fixed for two years. With this week’s introduction from Nationwide of a longer-term fixed rate at market leading levels, the intensity of the mortgage market rate war is certainly gathering momentum.

The addition of a mid-term three-year fix is also worth considering as a trade-off between the traditional two- and five-year rates, with rates looking set to increase over the mid-to-long term amid rising inflation levels.

“The very fact that there are various High Street lenders offering rates of below 1% shows how much appetite there is within the industry to lend” says Andy McBride, Business Development Director at Professional Contractor Mortgages. “With the Stamp Duty holiday being such a success, it may well have bridged the gap between complete meltdown at the height of the first lockdown, and normality going forwards.”

When figures are revealed later this month, many predict that June could be the busiest month on record for house transactions, with many striving to beat the deadline to save thousands in Stamp Duty.

Because of such a rush on the market, there is a suggestion that some buyers may not have considered all factors when choosing a mortgage product, as McBride explains.

“The vast majority of lenders will offer two or even three variations of their products. Usually, one with a low rate and high fee, and one with a low fee and high rate, with occasionally something in the middle too.”

“Traditionally, the difference between the higher and lower rates has been enough to justify paying an arrangement fee, often of £1,000 or more. However, with the current interest rate war, the gap between the lowest rate and the lowest fee options are not as significant as they once were.”

The advice is clear; do not be blinded by interest rate. As an indicator of that, Halifax, the largest mortgage lender in the UK, currently have a two-year fixed rate on offer at 1.04%, with a £1,499 arrangement fee. However, the bank also has a rate of 1.08%, also fixed for two years, with a £999 arrangement fee. This means the mortgage balance would have to be significant in order to justify the additional £500 in fees over the first two years.

“Now more than ever, a Broker is worth their weight in gold” concludes McBride. “As well as giving real life advice based on all factors at play, brokers can often access exclusive products not available on the High Street, adding even more value for buyers.”

“Add in any kind of non-standard factor to the application, whether irregular income, or financial issues, and it becomes even more crucial. Don’t blindly ignore the option to pay a fee for expert advice, as the savings even over the short term, could justify the investment handsomely.”

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