In a welcome boost for homebuyers grappling with high mortgage rates, NatWest has launched the lowest five-year fixed-rate mortgage on the market at just 3.97%.

This move comes hot on the heels of the Bank of England’s decision last week to lower the base interest rate from 5.25% to 5%, prompting lenders to slash their mortgage rates.

NatWest’s new deal pips the previous market leader, Nationwide, whose best five-year fixed rate stood at 3.99%. However, there’s a catch – you’ll need a hefty deposit of at least 40% of the property value to qualify. This type of mortgage, known as a 60% loan-to-value (LTV) mortgage, is typically offered to those seen as lower risk borrowers.

Another important factor to consider is the £1,495 fee associated with the NatWest mortgage, which is only available for online applications.

Experts Predict Further Rate Cuts on the Horizon

Despite the fee, experts believe this could be the start of a wave of reductions in mortgage rates, offering a glimmer of hope for those looking to buy a home.

David Hollingworth of L&C Mortgages predicts that “more lenders [are] likely to break through to sub-4% five-year rates.” He points out that the Bank of England’s earlier-than-expected base rate cut suggests further cuts before the year’s end, potentially driving down borrowing costs even further.

Echoing this sentiment, Aaron Strutt of Trinity Financial welcomes the downward trend in mortgage rates, adding that “the cost of funding mortgages has dropped over the last few days on the back of the base rate change.”

Is NatWest’s Deal Right for You?

While the headline rate of 3.97% is undeniably attractive, whether it’s the cheapest deal for you depends on the size of your mortgage. The hefty £1,495 fee needs to be factored into the overall cost.

For those borrowing substantial sums, such as £600,000, the low rate combined with the fee may still make it cheaper than other mortgages available.

However, for smaller mortgages, other options might be more cost-effective. For instance, if you were borrowing £300,000, Barclays’ five-year fixed rate of 4.03% with a lower fee of £699 could work out cheaper overall.