NatWest has announced a series of “highly aggressive” cuts in mortgage rates on new deals with rivals expected to follow suit.
The decision comes against the background of comments from the governor of the Bank of England, Andrew Bailey, suggesting cuts in the base rate are in the pipeline because inflation is falling faster than expected.
Separately, economists at Goldman Sachs have suggested the Bank of England base rate could come down from the current figure of 5 percent to fall to as low as 2.75 percent over the next 12 months.
A quarter point cut in the base rate could come in November with the possibility of two more similar reductions in December and January.
Speaking in Washington Andrew Bailey indicated that inflation around the world, including the UK, is falling “faster than we expected”. The current CPI inflation rate is 1.7 per cent, which is below the Bank’s 2 percent target.
As a result, economists say there is scope to make faster and deeper cuts in interest rates.
NatWest will reduce rates on selected new two and five-year fixed-rate deals available from Friday with cheaper loans to first-time buyers, remortgages and buy-to-let deals. Rates will be dropped between 0.41 percent and 0.2 percent depending on the product.
Brokers welcomed the cuts. For example, Darryl Dhoffer, Managing Director at The Mortgage Geezer, said: “These are highly aggressive rate reductions from NatWest and are poised to disrupt the market.
“Borrowers will be salivating at these reductions and the fact they come ahead of the Budget is an added bonus.”
Ben Perks, Managing Director at Orchard Financial Advisers, told Newspage that the move by NatWest makes rivals “look rather silly”.
He said: “When others are increasing their rates, they have thrown the cat among the pigeons and announced some pretty chunky cuts to their product range. The message is clear; they will not be deterred from lending, they are not fearful of the upcoming Budget and they are very keen to lend in the last quarter of 2024. It’s game on for borrowers.”
Justin Moy, Managing Director at EHF Mortgages, said: “Purchase deals have some extra rocket power with larger cuts of up to 0.4%, again helping stimulate activity and will raise the eyebrow of other lenders. This is a great move by NatWest and others lenders will undoubtedly follow quickly.”
Simon Bridgland, Director at Release Freedom, said: “NatWest knocks it out of the park with some huge rate drops.
“Things are set to heat up this week as pressure piles onto lenders to secure new business before the year is out. Lenders changing fixed rate deals in quick succession means we could be witnessing the start of a call to arms from lenders chasing down borrowers before we see in 2025.”
Hannah Bashford, Director at Model Financial Solutions, said: “Whatever the reason for these cuts, these are certainly rate reductions that will turn heads. They will also help NatWest hit their year-end targets. Who will be next? It’s hard to see other lenders not having to follow suit.”
And Katy Eatenton, Mortgage & Protection Specialist at Lifetime Wealth Management, said: “NatWest clearly aren’t too worried about the Budget as these are serious cuts. Other lenders will surely now follow and that’s fantastic news for borrowers and the property market.”
