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NatWest has become the latest major lender to offer a mortgage at less than 4 per cent as a new price war has erupted between British banks.
The traditional lender began offering a 3.89 per cent deal with a fee of £1,495 on Tuesday, closely following other attractive offers for homeowners from Santander, Barclays, HSBC and Halifax in recent days.
Many of the new offerings are focused on people who can offer an initial fee, large deposits and are premium banking customers of the respective lender.
For example, last week Barclays started offering a five-year fixed rate of 3.83 per cent for home buyers with a 40 per cent deposit, which has a product fee of £899, but it is only for its premier banking customers.
HSBC's best offer of 3.92 per cent is also available to premier banking customers and requires a 40 per cent deposit and a fee of £1,499.
Nationwide kicked off the price war two weeks ago when it began offering a five-year fixed-rate deal at 3.99 percent.
The increased competitiveness from lenders comes after the Bank of England decided to cut interest rates from their 16-year high of 5.25 percent by a quarter of a point to 5 percent in early August.
The cut came as a welcome relief to those on variable rate mortgages, who saw their annual payments cut by an average of £340 as a result of the rate cut.
It has also been a boon for the 700,000 fixed-rate mortgage deals that are set to end in the second half of this year, which equates to about 4,000 homeowners a day potentially facing rate shock when their lower-rate deal ends.
Riz Malik, director of R3 Mortgages, said: “It’s barely an hour into the new week and NatWest has already unleashed yet more rate cuts.
“With Santander announcing cuts on Friday evening, this should be another fantastic week of sky-high interest rates, as the UK basks in the sunshine. Of course, all eyes are on Wednesday and the latest inflation data. That will have a key bearing on what happens with rates next.”
David Stirling, independent financial adviser at Mint Mortgages & Protection, said: “The Olympics may have finished yesterday but the competition between the banks continues, with NatWest cutting rates early on Monday morning. Let’s hope there are no false partisans and the race to cut rates further below 4% continues to gather pace this week among the banks.”
Mortgage rates have been well above 5 percent due to a succession of interest rate hikes as the Bank tried to control rising inflation.
The situation was made worse by Liz Truss's disastrous mini-budget, which spooked the markets and sent the British economy into a tailspin.
