Mortgage lending set to rise to next year as NatWest launches 4.07% fix
Major mortgage lenders have been improving their fixed rates as they continue to compete for business and try to meet their end-of-year sales targets.
Santander, HSBC, NatWest and a host of smaller lenders have lowered their fixed rates recently, so we are getting closer to seeing a sub-4% mortgage again. We expect more mortgage price reductions over the coming weeks, even though it is unlikely there will be a cut to the Bank of England base rate before Christmas.
NatWest has launched the most competitively priced five-year fix at 4.07%, and it is available to homebuyers borrowing between £25,000 and £2 million. There is a £1,495 arrangement fee, and applicants will need a 40% deposit to qualify. Santander also has a two-year fix priced just over 4.2% with a £999 fee for borrowers with larger deposits and a clear credit history.
Significant changes have been made to the stress test figures used in the lender's mortgage affordability calculations to work out maximum loan sizes, leading to borrowers accessing more generous loan sizes.
Halifax has also started offering larger loans to borrowers buying homes with high Energy Performance Certificate ratings.
More mortgages are set to be issued next year
UK Finance, the trade association for the UK banking and financial services sector, has published its housing and mortgage market forecasts for 2025, predicting gross mortgage lending will be up 11% on this year, hitting £260bn. House purchase lending is also expected to rise by 10% to £148bn.
The product transfer market, where homeowners switch rates with their existing lender rather than remortgage to another lender, is set to increase by a whopping 13% to £254bn.
With rate and cost pressures set to ease, the outlook for 2025 is for a gradual improvement in mortgage affordability, feeding into market growth. As interest rates tick down, UK Finance expects arrears to continue to fall, with tailored forbearance helping those who need it.
How much would NatWest's 4.07% fixed mortgage cost?
Representative example: A capital and interest Natwest mortgage of £350,000 payable over 30 years, initially on a fixed rate basis at 4.07% until 30/04/2030 and then on the lender's 7.74% standard variable rate for the remaining 25 years. The 4.07% rate would require 63 monthly repayments of £1,685.11 followed by 297 payments of £2,385.77. The total amount repayable would be £815,760.62 made up of the loan amount, plus interest (£464,734.62) and £995 (product fee), £65 (final repayment charge), £30 (completion fee). The overall cost for comparison is 6.5% APRC representative.
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The information contained within was correct at the time of publication but is subject to change.
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