14 May: Lender Tactics Vary In Run-Up To Bank Rate Cut
NatWest is increasing the cost of selected two and five-year fixed-rate residential mortgages by 0.05 percentage points. The increase will be applied on deals for home purchase, including first-time buyer rates, and for remortgage, effective tomorrow (Wednesday).
The move comes despite falls in wholesale interbank borrowing rates, which suggests NatWest is attempting to control demand for its products so as to be able to maintain service standards, and not responding to fears that borrowing costs generally are set to remain high.
There is a growing expectation that the Bank of England will trim the Bank Rate from 5.25% at some point over the summer.
NatWest already increased rates for new borrowers in April and hiked the cost of product transfer deals (available to existing customers coming to the end of a deal and looking for a new rate) on 8 May.
Its two-year fixed rate for home purchase will now increase from 4.77% to 4.82% (60% LTV) with a £1,495 fee. The five-year equivalent rises from 4.4% to 4.45%.
For residential remortgage, NatWest will now offer a two-year fee-free deal from 5.22% at 60% LTV (up from 5.17%), or fee-free five-year fixed rates from 4.67% (up from 4.62%).
Nick Mendes at broker John Charcol said: “Given that most lenders have raised their rates recently, including NatWest today, I think hopefully there should now be scope for some reductions to fixed rates in the next two weeks.”
Santander has pushed up the cost of fixed rate deals for new and existing customers (those looking for product transfer deals) by up to 0.33 percentage points. The rise comes despite the Bank of England freezing the Bank Rate at 5.25% on Thursday last week.
The high street bank, the fourth biggest mortgage lender, last increased rates on 3 May.
The bank’s new deals and rates include increases to selected residential purchase and remortgage rates, as well as buy-to-let borrowing. It is offering five-year fixed rates for residential remortgage from 4.5% with a £999 fee (60% LTV) and two-year equivalent deals from 4.94%.
The lender’s maximum loan size on selected residential fixed rates will also increase from £570,000 to £1 million at 90% loan to value.
MPowered Mortgages has cut two and five-year fixed-rate mortgage deals across its range and is offering market-leading deals for home purchase. It is the lender’s second rate cut in under a week.
The lender, which offers deals only through brokers, has a five-year fixed rate for home purchase at 4.37% (down from 4.59%) with a £999 fee. This is for borrowers with at least a 40% cash deposit to put towards their purchase (60% loan-to-value).
Over two years, MPowered’s equivalent fixed-rate deal for purchase has been slashed to 4.67% (down from 4.84%), also with a £999 fee.
Swap rates, the rates at which banks lend to each other and which therefore influence fixed mortgage rates, have been falling since the Bank of England kept the Bank Rate frozen at 5.25% last week. Experts now predict the Bank Rate will be cut before the end of the summer.
MPowered’s remortgage rates are higher than its purchase rates over two and five years, but they are still competitive. It is offering a two-year deal at 4.77% and five-year rates from 4.43% (both at 60% LTV with a £999 fee). In contrast, Natwest has a five-year fixed rate for remortgage at 4.32% (60% LTV), for example, but it has a bigger fee at £1,495.
David Hollingworth, at broker L&C Mortgages, said: “It’s good to see a lender taking the opportunity to compete harder. Hopefully this is an indication that the recent increases in fixed mortgage rates are calming down.”
Matt Surridge, sales director at MPowered, said: “The swap markets are moving at pace. It is important that as a responsible lender we are able to react and pass on any savings we can to borrowers. I’m therefore really pleased we are one of the first, if not the first to cut rates this week having already cut rates once in the past week.”
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