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NatWest sparks price war with record five year mortgage

9th August 2012


NatWest has set a new record for the lowest-ever five year fixed mortgage, indicating a 'race to the bottom' amongst lenders competing for desirable customers.

The bank, which is part of Royal Bank of Scotland, trumped HSBC's record 2.99pc rate with a 2.95pc product. "We are really seeing a mini price war" said mortgage broker Stuart Gregory, who indicated that other lenders may also launch new rates in the coming weeks. HSBC announced its new five-year rate earlier this month,

However, only those with a large amount of equity in their homes who are willing to pay a steep fee will be able to benefit from either bank's low rate. You will need to have 40pc equity in your home and pay a fee of £2495 to get the 2.95 per cent rate. If you do not wish to pay the fee the rate is a less competitive 3.69pc.

Mr Gregory, from Lentune Mortgages, said that the three month Libor rate – the rate which banks use to lend to one another – has been reducing since January, meaning that it is cheaper for the banks to lend money. "Also we are reaching the midyear point where lenders are assessing how much they have lent – and perhaps finding out how far behind their own targets they are," he said. He urged those on variable rates to consider these five-year fixes, which bring greater certainty.

"Although there are no signs of the Bank of England base rate rising anytime soon, it's important for borrowers to realise that base rate has little effect on these fixed rates we are seeing. Borrowers who feel secure on a base rate linked Tracker or Variable rate should be wary of waiting too long before reviewing – wait too long and the jump in monthly payments from their current lows could be higher."

Source:  Telegraph 9/8/12