Brokers welcome cheaper deals but caution borrowers not to get swept up in the frenzy
A fresh mortgage rate battle has erupted among Britain’s biggest lenders, with Nationwide Building Society triggering another round of reductions that have pushed pricing to its lowest point since 2022.
From Wednesday, Nationwide will cut rates by up to 0.25 percentage points across two-, three-, five- and ten-year fixed products. The headline two-year fix - 3.64 per cent for borrowers with at least a 40 per cent deposit - is the cheapest widely available since before the fallout from the 2022 mini-Budget.
The move comes amid a spate of reductions from HSBC, Barclays, NatWest, Halifax and Santander, as expectations grow that the Bank of England could lower the base rate before year-end. Moneyfacts data shows the average mortgage rate has fallen below 5 per cent for the first time in over a year.
Competitive Cuts Bring Confusion
While the latest wave of price cuts is a welcome development for borrowers, brokers warn the constant reshuffling of rates is sowing confusion among clients.
“It does cause a little bit of confusion,” said Rebecca Geer, of Oakdene Mortgages. “I have to explain to clients that they might not actually be eligible for deals they have seen online.”
Geer added that while competition “is helping people — rates are coming down,” it can also distort borrower behaviour. She noted that many clients are quick to react to headline rate changes and can become “fixated on numbers instead of the bigger financial picture.”
Brokers Warn on Sustainability
For some brokers, the recent “mini rate war” has injected fresh competition into the market but also raised concerns about sustainability. Craig Head, of Mortgage Required, said borrowers are benefiting from a steady stream of rate cuts, but “the pace and volatility of these changes does tend to breed confusion and, in some cases, unrealistic expectations about how much further rates can fall.”
“For lenders, the drive to undercut rivals is squeezing already thin margins. Any sustained price battle is likely to be unsustainable, particularly if wholesale funding costs rise and swap rates turn.”
A Perfect Storm for Competition
Other brokers believe the cuts are less a strategic shift and more the product of market timing.
“Anything that drives competition in the market is good for consumers – the market is never static,” said Graham Taylor, of Hudson Rose. “I’ve been in this game long enough to know that nothing is permanent. Consumers should take advantage of lenders offering lower rates - most likely as the result of a perfect storm of a quieter lending market, base rate expectations and commercial lending targets as we head towards the new year.”
Relief, but for How Long?
Yet brokers caution that the window of opportunity may not last. Swap rates remain volatile and lenders are under pressure to hit end-of-year lending targets. As a result, the pace of rate changes may slow once the next Bank of England decision provides greater clarity on the base rate trajectory.
For now, the rate war continues to benefit borrowers, but industry voices warn that this period of fierce competition may prove to be short-lived.
