Is this the start of a mortgage rate war?

Today, Platform launched the lowest rate two-year fixed rate mortgage at 0.95% until 31 August 2023. The lender is part of The Co-operative Bank and only offers its mortgages through mortgage brokers. This new deal comes hot on the heels of a 0.99% fixed deal over two years also launched today by Nationwide Building Society. TSB launched the same rate a few weeks ago and there are now three mortgages with a rate of less than 1% fixed over two years.

Those borrowers with the best credit scores, no affordability issues, and a loan-to-value of 60% or below can access competitive rates from well-known brands, such as Santander, NatWest, Skipton Building Society and HSBC. The top ten lowest fixed rate mortgages right now range from 0.95% to 1.14%. The wider market is yet to see a wholesale reduction in rates, with averages for two-year fixed deals increasing from 2.52% in January 2021 to 2.58% in June 2021. Rachel Springall from Moneyfacts.co.uk is optimistic that the market is changing for the better, commenting:

“The motivation to switch from a standard variable rate (SVR) mortgage to a fixed rate may be obvious, but what is more evident over the past few months, is the peace of mind fixing for longer may offer. Despite a rise to the average two, five and 10-year fixed mortgage rate over the past few months, it is still worth considering a new fixed deal. The volatility of interest rates is a response to the pandemic, as the mortgage market contracted whilst lenders focused on their existing customers and less so on new business. However, the situation appears to be starting to change for the better in recent weeks as both rate competition and product volumes are starting to return.”