Mortgage price war ramps up as another major lender slashes rates below 4%

04 January 2024 , 12:11

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First Direct is the latest lender to cut mortgage rates (Image: NurPhoto via Getty Images)

Online bank First Direct has joined in a mounting mortgage price war by becoming the latest to launch a sub-4% deal.

First Direct announced it was reducing rates across its entire range of repayment mortgages from tomorrow (January 5). The biggest cut is on a 10-year fixed rate mortgage, which is being slashed by 0.98 percentage points to 3.99%.

The rate applies to those needing to borrow no more than 60% of the value of the property. The rate on the First Direct five-year fixed rate standard mortgage - with the same 60% loan-to-value - is also falling to 3.99%.

Rates on two and three-year fixed rate deals will also be cut, as well as for those with smaller deposits. First Direct is part of HSBC, which cut rates on some mortgages to under 4% today. Experts predict other lenders will swiftly follow suit.

Liam O’Hara, head of mortgages at First Direct, said: “We are committed to reducing the cost of borrowing where we can for our customers, and we’re very pleased to be starting the year with the introduction of new sub-4% mortgages.”

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He added: “Whether people are making their first steps onto the ladder, moving house or re-mortgaging, we offer a range of flexible features designed to add value and support our customers. These include unlimited overpayments on all our mortgages, 40-year maximum terms and product booking fees capped at £490.”

TSB has also announced revised rates for a range of mortgage products by up to 0.55 percentage points, also from tomorrow. The rate for a two-year fixed rate for a first-time buyer and home mover now starts at 4.54% with a £995 fee, for someone needing to borrow no more than 60% of the value of the property. The rate for someone remortaging is 4.44%.

Halifax became the first major lender to slash rates on its remortgage deals by up to 0.83 percentage points earlier this week. Halifax also cut rates for existing borrowers who refinance with the bank by up to 0.92 percentage points.

This is the first time mortgage rates have dropped this low since June last year. Borrowing costs have fallen after inflation came in lower-than-expected for the 12 months to November. Consumer Prices Index (CPI) was last month confirmed to have fallen to 3.9% - beating expectations of a smaller drop to 4.4%.

Graham Hiscott