Nationwide cuts mortgage rates as BoE holds at 4%

Nationwide Building Society said it will cut mortgage rates on select products by up to 0.18 percentage points, effective from tomorrow. The move follows the Bank of England's decision to hold the base rate at 4% and comes as lenders have been lifting some rates in recent weeks, prompting renewed competition in the market.

Among the cuts, Nationwide's lowest two-year fixed rate for a first-time buyer with a 25% deposit will drop to 4.09% with a £999 fee. On a £200,000 mortgage repaid over 25 years, that would translate into roughly £1,066 per month.

For home movers with a 40% deposit, Nationwide is offering a two-year fix at 3.8% with a £1,499 fee, which equates to about £1,034 per month on a £200,000 loan over 25 years. Buyers moving with a 20% deposit can secure a three-year fix at 4.24% with a £999 fee.

The cut comes as lenders respond to shifting funding costs and a cooling of mortgage demand in parts of the market. Analysts noted that the size of the reductions was modest but could influence pricing by other lenders over the coming weeks.

"It is great to see Nationwide lowering rates again and offering two-year fixes from 3.8 per cent and five-year fixes from 3.94 per cent," said Aaron Strutt of Trinity Financial. "Most of the big lenders have been pushing up their fixes recently so this is a welcome reversal from the price hikes we have been seeing. Many of Nationwide’s competitors will probably look at this move and wonder how they are pricing, but as we know Nationwide likes to top the best buy tables to increase competition in the market. There are still decent rates to choose from at the moment."

Nicholas Mendes, mortgage technical manager at John Charcol, said further cuts could target borrowers with smaller deposits but warned margins are thin. "Margins are already thin, so I’d expect only marginal tweaks there, mainly to stay a nose ahead of competitors," Mendes said. "We’ll likely see one or two lenders mirror the move and then reprice upwards again to manage service levels. The real battleground now is higher loan-to-values. That’s where we haven’t seen the same pace of cuts yet, and where I’d expect more meaningful price competition next. Good news for buyers with smaller deposits and for remortgagers who have built a bit of equity."

The development follows a period in which several major lenders have raised mortgage rates, complicating the decision for buyers and remortgagers. Market watchers say the pricing environment remains volatile, with competition likely to hinge on high-LTV deals and equity levels as lenders balance funding costs and risk.