Nationwide raises mortgage rate hopes as offers rates below 4%

Ahead of the Bank of England's next rate announcement, Nationwide is extending an interest rate offer for a mortgage that is less than 4%.

The largest building society in the UK will lower its five-year fixed mortgage rates to 3.99% starting on Wednesday for new borrowers who move into new homes with a 40% down payment.

In anticipation of the anticipated August rate drop by the central bank, other lenders have also started to reduce their rates.

Nationwide hasn't offered rates lower than 4% since February.

Due to the fact that lenders base their mortgage rates on the rate set by the central bank, mortgage borrowing costs are still higher than they have been for the past ten years.

This is still at a 16-year high of 5.25%, but some believe that since inflation is declining, rates will be lowered at the central bank's next meeting on August 1.

In order to boost a flagging economy or in times of high inflation, central banks often raise borrowing rates. In times of low inflation, they try to lower them.

When their present fixed-rate agreements expire, almost 1.6 million current borrowers will be looking to re-mortgage. Some of them will be moving off a rate of less than 2%, which would mean significantly higher repayments on their subsequent house loan.

According to data from Moneyfacts, the average five-year fixed homeowner mortgage rate is currently 5.40%, down from 5.47% on Monday.

After peaking at 5.88% on Monday, the average two-year fixed homeowner mortgage rate is now 5.81%.

(Sources: bbc.co.uk, moneyfacts.co.uk)