Nationwide cuts mortgage rate as banks announce changes that could allow people to borrow more

22 April 2025, 17:25

Britain's biggest building society is cutting mortgage rates as low as 3.89%, as banks announced changes that could boost people's ability to get a mortgage or borrow more.

Nationwide Building Society said that from Wednesday it will cut rates by up to 0.25 percentage points on selected two, three and five-year fixed rate products across its first-time buyer and home mover ranges.

The deals will include a two-year - or a five-year - fixed rate at 3.89%, for borrowers with a 40% deposit, with a £1,499 fee. This is available to existing and new Nationwide customers who are moving home.

A first-time buyer two-year fixed-rate mortgage will also be offered at 4.09%, for borrowers with a 40% deposit, with a £1,499 fee.

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The cuts were announced as both HSBC UK and First Direct announced changes to stress rates used in their affordability calculations, which could increase some people's ability to borrow.

Stress rates are used to check whether borrowers can still afford their mortgage if rates were to increase.

HSBC UK estimated the move could enable 20,000 more customers to get a mortgage with it, alongside being able to borrow bigger amounts as part of a mortgage. It said its changes will benefit both purchase and remortgage applications across its product range.

Where offers increase for first-time buyers, the average increase in offer will be £39,000, the bank said.

Oli O'Donoghue, HSBC UK's head of mortgages, said "By carefully reviewing our affordability calculations, allowing more customers to meet affordability criteria and potentially access increased borrowing amounts, we are aiming to ease some of the pressure on prospective buyers."

First Direct said its stress rate changes could benefit around 85% of mortgage applicants, allowing them to borrow an average of £22,000 more.

The lender is also applying a range of rate reductions of up to 0.14 percentage points across more than 100 products.

Liam O'Hara, head of mortgages at First Direct, said: "The changes will benefit the vast majority of our existing customer base when they decide to remortgage or take out a new product.

"On top of this, we are pleased to be applying more reductions to our rates."

More widely in the mortgage market, the Financial Conduct Authority (FCA) is currently looking at its expectations for mortgage lending as part of proposals to streamline its rules, which could make it easier for more people to access home loans.