Mortgage rates dropping ‘faster than expected’

Mortgage rates are dropping faster than many expected, Rightmove claims.

Nationwide unveiled a 3.99% five-year fix for home purchases this week – the first sub-4% mortgage for months.

The reduction comes amid hopes of an interest rate cut by the Bank of England at its upcoming Monetary Policy Committee meeting on 1 August or in September

Matt Smith, Rightmove’s mortgage expert said: “We've seen average mortgage rates drop at a pace not seen for a while this week, faster than many expected as lender competition hots up. 

“The first sub 4% rate for those with larger deposits and prepared to pay a higher fee is the headline-grabber, but we've also seen some notable drops in rates in other loan-to-value brackets which should benefit more mass-market movers. It's interesting to see this competition for business increase even before the interest rate decision.

“Though there's still only around a 50% chance the base rate will be cut next week, if the current positive market sentiment continues, we could see further mortgage rate cuts."

Gary Howorth, sales director at Chestertons, added: “To some, Nationwide’s decision to lower its rates may come as a surprise as the likelihood of the Bank of England cutting interest rates next month remains uncertain. 

“Nationwide’s new mortgage products indicate the beginning of more positive market conditions for house hunters but also for existing homeowners looking to re-mortgage. We have already seen buyer activity pick up after the General Election and expect the lower rates to boost buyer confidence further.

"This will inevitably lead to an increase in market activity over the coming months; especially if other lenders follow suit.””