Hope for millions as major banks launch mortage ‘price war’ – can you get a better deal?

MAJOR lenders have launched a new mortgage 'price war' bringing hope for millions.

First Direct, Halifax and NatWest have joined a stream of major lenders in announcing cuts to their mortgage rates.

First Direct said it has reduced rates across more than 20 of its two, five and 10-year fixed-rate mortgages by up to 0.20 percentage points, with immediate effect.

Halifax said it is reducing five-year fixed-rate mortgages by up to 0.71 percentage points, and two-year fixed-rate loans will fall by as much as 0.27 percentage points.

NatWest is also reducing five-year fixed-rate mortgages by up to 0.65 percentage points.

The cuts to both Halifax and NatWest mortgages will take effect from Friday.

Several major mortgage lenders have been cutting rates this week, amid signs that stubbornly high inflation is easing.

The Bank of England uses base rate rises, which affect borrowing costs, as a tool to subdue inflation.

UK Consumer Prices Index (CPI) inflation was 7.9% in June, slowing from 8.7% in May, according to the Office for National Statistics (ONS).

This has fuelled expectations that the base rate may not need to climb so high.

Among the rate reductions, HSBC has cut some homebuyer, first-time buyer and remortgage rates on offer by up to 0.35 percentage points, as well as adding a £500 cashback incentive to some deals.

Nationwide previously announced reductions of up to 0.55 percentage points on its fixed mortgage products from Wednesday.

And, earlier this week, TSB announced reductions of up to 0.40 percentage points to selected five-year fixed homeowner mortgages, with rates starting from 5.44%.

Swap rates, which underpin fixed mortgage rates, have now stabilised amid expectations that inflation is cooling.

It comes after the Bank of England last week raised the base rate from 5% to 5.25% – the 14th increase in a row.

According to , the average two-year fixed residential mortgage rate on Thursday is 6.83%, unchanged from Wednesday.

The average five-year fixed residential mortgage rate is 6.33%, down from an average rate of 6.34% on Wednesday.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "The relative stability in Swap rates, which underpin the pricing of fixed-rate mortgages, has given a growing number of lenders confidence as to where they can price their products.

"Those who have made reductions to their rates should be applauded for doing so and hopefully those who haven't will follow soon."

Experts have said now is the prime time to speak to a broker if you're looking to remortgage or buy a new home.

Nicholas Mendes, mortgage technical manager at John Charcol said: "For those that currently have a mortgage application in progress or approaching the end of their fixed rate, now is when speaking with a broker can certainly be financially beneficial.

"A broker will be able to keep you informed of any rate changes to ensure you get the best rate right up until completion."

How to find the best mortgage rates

Getting the best rate on a mortgage depends on what's on the market at any given time.

That said, there are a few ways you can land a good deal.

In most cases, the larger the deposit you have the lower the rate you can get.

If you're remortgaging and your loan-to-value ratio has changed this could also give you access to better rates than before.

Your loan-to-value ratio is the ratio of what you borrow on a mortgage against how much you paid as a deposit.

For example, if you get a £160,000 mortgage to buy a £200,000 home, the loan-to-value is 80%.

If your credit score improves or your salary goes up this can see you offered better mortgage rates too.

And if you're nearing the end of a fixed deal soon it's worth looking for a new one.

You can sometimes lock in current deals up to six months before your current deal ends.

Before this point you will usually have to pay an early exit fee.

But, depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal.

Make sure you compare the costs first to figure out where you might save the most money.

Meanwhile, you can find the best deal using a mortgage comparison tool. This will show you what's available out there.

Or, you could use a mortgage broker can compare deals for you.

They may charge you for the service but should be upfront with you about the costs.