NatWest and Virgin Money have become the latest big lenders to slash rates on their fixed mortgage deals, prompting claims that a full-scale home loans “price war” has broken out.
The moves came after it emerged on Wednesday that four of Britain’s largest home loan providers were cutting the cost of their new fixed-rate deals, with Halifax reducing rates by up to 0.71 percentage points from Friday, and HSBC, Nationwide and TSB making similar moves.
Twenty-four hours later, NatWest announced it was cutting rates on its house purchase and remortgage fixed home loans by up to 0.65 percentage points, also with effect from Friday. That means a five-year fixed rate aimed at homebuyers with a 10% deposit that is currently priced at 6.64% will be offered at a rate of 5.99%.
Other NatWest deals, including buy-to-let and shared equity mortgages, will also have their rates cut.
Virgin Money announced it would be launching a range of cheaper remortgage deals for those wanting to fix their monthly payments. The lender indicated these would be available for only seven days, until closing time on 17 August. That prompted brokers to call it a “flash sale” and claim that banks and other lenders were battling for market share.
Kylie-Ann Gatecliffe, director at North Yorkshire-based KAG Financial, said: “The competition is on. It is great to see high street lenders reducing rates, and a rate war is welcomed by us brokers wanting to offer borrowers more appealing products. I suspect others will follow suit and we will hopefully see the lenders yet to reduce also start to reprice.”
Other commentators said that a fall in housing transaction volumes had clearly rattled lenders.
Lewis Shaw, founder of broker Shaw Financial Services, said that after months of mortgage rate rises, “this is the light at the end of the tunnel we’ve all been waiting for”. He added: “If we see positive inflation data next Wednesday, expect more of this.”
With Virgin Money making a move with its seven-day sale, the indications were that “we’re now fully in a mortgage market price war”, said Riz Malik, founder and director at broker R3 Mortgages.
“This is not only great news for residential borrowers but also a silver lining for buy-to-let landlords who have felt sidelined,” he added.
Mortgage rates have risen rapidly as the Bank of England has pushed up interest rates in an attempt to tame inflation. Last week the Bank raised interest rates for the 14th consecutive time, bringing the base rate to 5.25%.
