The mortgage war among Britain's lenders entered a new phase yesterday with the decision of Nationwide Building Society to cut its standard mortgage rate by 0.25 per cent to 6.49 per cent, the lowest home loan rate for over 30 years.
At 6.49 per cent, Nationwide's new rate will be 0.5 per cent below most of its big name rivals in the home loans market, notably Halifax, Woolwich and NatWest on 6.99 per cent and Abbey National at 7.04 per cent.
Although Nationwide's rate cut is seen as a response to last month's 0.25 per cent reduction in bank base rates to 5.75 per cent by Chancellor of the Exchequer Mr Kenneth Clarke, none of its rivals are expected to match its new rate in the immediate future.
Nationwide is one of the few major building societies not planning to convert into a bank and float on the stock market and, as such, it emphasises that its new rate reduction reinforces the benefits ford borrowers of being with a mutual building society.
It said it was able to afford lower lending rates while maintaining savings rates at competitive levels because it did not have to pay dividends to shareholders.
"We are continuing to demonstrate that you really are better off with a building society," said Nationwide's chief executive, Mr Britain Davis.
The new rate would reduce the cost of home loans to levels last seen over 30 years ago in January, 1965, and give added impetus to the housing market now showing distinct signs of recovery. The number of housing transactions is markedly higher compared with a year ago and house price inflation is beginning to respond to cheap mortgages.
