Nationwide Launches A Sub 1 Per Cent Five Year Deal | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 21/07/2021

Nationwide Building Society has become the first mortgage lender to launch a sub-1% five year fixed rate mortgage deal.

The deal, which becomes available to borrowers moving home and remortgaging, is available from today and is the first time since records began that a rate below 1% has been available on a five year fixed deal.

The deal offers 0.99% at a 60% loan-to-value (LTV) and charges £1,499 in product fees and requires borrowers to take a minimum loan of £300,000 for those remortgaging and a minimum of £275,000 for those moving home. Commenting on the launch of the deal Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Nationwide Building Society has ramped up the mortgage rate war by offering the first sub-1% five year fixed rate mortgage onto the market. This comes just a few weeks after we witnessed HSBC cutting its own five year fixed rates, which includes a low rate deal priced at 1.06%, a market-leading rate. It will be interesting to see after notable reductions have already been made in the two year fixed market, whether five year fixed deals will continue to be cut – but regardless this will be great news to borrowers looking for a low rate deal.”

When considering this mortgage deal, borrowers should keep in mind that the product fee will be added to the mortgage repayments. As such, the lowest rate may not be the best deal if the product fees are high.

For example, a mortgage borrower with a property valued at £250,000 looking to borrow £150,000 on a five year fixed deal will find that although HSBC offers a lower rate of 1.06% than Nationwide’s deal offering 1.29%. The deal from HSBC has a product fee of £1,499, whereas the deal from Nationwide has no product fees. This means that when looking at the total cost of the mortgage over the five year period, the Nationwide deal is cheaper costing the borrower £35,433.20 compared to the HSBC deal which costs £35,982.40.

As well as considering product fees, those already locked into a fixed term mortgage deal may be tempted to exit their deal early to lock into the new, lower, rate. For some borrowers this may make financial sense, but borrowers should be aware that they will have to pay an early exit charge in order to leave their current deal early, which, depending on the cost of the charge could result in the new mortgage deal being more costly despite the lower rate. For example, those locked into the HSBC fixed rate deal at 1.29% at a 70% LTV will have to pay an early repayment charge of 5% of their outstanding mortgage loan if they exit their deal in the first year of the term, but this charge drops by 1% each year of the deal, so those in their fourth year of the term have to pay an exit charge of 2% and those in their final year a charge of 1% of their outstanding mortgage. Depending on the size of the mortgage loan, those in their final two years of the deal could find that the amount by which they could reduce their monthly repayments by locking into the Nationwide rate of 0.99% will make paying the early exit charge on their current deal worthwhile.

Another factor those considering the 0.99% deal from Nationwide should keep in mind is that the building society is likely to be very select about which applicants for the deal it accepts. As this is the most competitive five year fixed deal available in the market those likely to be accepted will probably need an excellent credit score, high affordability, be in full-time employment, and looking to borrow against a freehold house without any potential issues.

Clearly, although this rate from Nationwide is a highly attractive deal, borrowers need to take into account many factors when considering this deal. For those unsure about whether it is the right deal for them, it may be worthwhile speaking to a mortgage broker who will be able to take all the borrower’s individual requirements into account when looking at which option is best. Readers of Moneyfacts.co.uk can speak to a mortgage broker for free if they chose to use our preferred brokers Mortgage Advice Bureau – more information about which can be found here.

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