A couple of the nation's major lenders continue to offer fixed mortgage rates just below the 4% mark, as they continue to fine-tune their offerings following a significant interest rate cut by the Bank of England. Yet, these under-4% deals are proving fleeting, with lenders pulling them from the market as quickly as they arrive.
The average rate for a two-year fixed mortgage stands at 5.2%, lower than last week’s 5.41%, while five-year fixed deals average 5.44%, compared with 5.54% in the previous week, according to data from Uswitch.
The Bank of England (BoE) reduced its interest rate to 4.5% in February, its lowest level in more than 18 months, offering some relief to mortgage holders across the UK.
Alice Haine, personal finance analyst at investment platform Bestinvest by Evelyn Partners, said that following the BoE's third rate reduction last month, "buyers and sellers will now be on tenterhooks to see if the central bank pushes ahead with a fourth interest rate cut later this month."
"Three quarter-point interest rate cuts have eased borrowing costs and improved affordability positions for many, but sticky inflation and robust wage growth may complicate the decision for the rate-setting Monetary Policy Committee," she said.
Last week, HSBC (HSBA.L) launched a 3.98% deal but not everyone will be able to take advantage of it. Customers looking to take advantage of the five-year fix will need an annual income of £100,000 or over and be a Premier customer with the bank.
Meanwhile, TSB has launched a deal that will allow buyers to purchase new build properties with a deposit of just 5%.
Nationwide Building Society (NBS.L) announced last week that it was cutting rates by up to 0.25% across selected two-year, three-year and five-year fixed-rate products, with the changes having come into effect from Friday 28 February.
The building society’s lowest mortgage rate now stands at 3.99%, available to existing customers switching to a new deal and new customers looking to remortgage.
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The recent moves come as data showed a sharp increase in the number of people taking out mortgages in later life as more people continue to work after pension age.
There were 35,840 new loans to people over the age of 55 in the last three months of 2024, an increase of 28.2% since the same period the previous year, according to figures from UK Finance.
Also, the Financial Conduct Authority (FCA) is moving forward with its "growth proposals", including changes to mortgage affordability. The government and FCA are considering relaxing mortgage affordability rules to boost first-time buyer lending, including reforms to loan-to-income caps and financial stress-testing rules that limit how much first-time buyers can borrow.
HSBC (HSBA.L) has a 4.07% rate for a five-year deal, which is unchanged from the previous week. For those who have a Premier Standard account with the lender, this rate comes in at 3.98%.
The 3.98% five-year fix comes with a £999 product fee. A £200,000 mortgage would cost someone £1,053 a month, based on a 25-year repayment term. It is only available to customers who are HSBC Premier banking customers.
To qualify as a premier customer borrowers will need to have an individual annual income of at least £100,000 and pay it into an HSBC Premier Bank Account, or have savings or investments of at least £100,000 with HSBC in the UK.
Looking at the two-year options, the lowest rate stands at 4.19% with a £999 fee, which is also unchanged from the previous week. For premier clients this comes down to 4.16%.
Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit.
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HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. The rates are much higher, however, with a two-year fix coming in at 5.57% or 5.25% for a five-year fix.
This is because the rate someone can get will be determined by their financial situation and the size of their deposit. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky.
NatWest (NWG.L) has a five-year deal coming in at 4.12% with a £1,495 fee, which is unchanged from the previous week.
For a two-year fix, the cheapest deal comes in at 4.15%, also unchanged from last week's deal. In both cases, you'll need at least a 40% deposit to qualify for the rates.
At Santander (BNC.L), a five-year fix now come in at 4.13%, with a £999 fee, assuming you have a 40% deposit. This rate is up from 4.06% last week.
For a two-year deal, the rate has risen to 4.23% with the same £999 fee, up from the sub-4% offer of 3.99% last week.
A five-year fix at Barclays (BARC.L) comes in at 4.06%, which is slightly lower than the 4.09% on offer last week. For "premier" clients this rate drops to 3.99%.
When it comes to two-year mortgage deals, the lowest you can get is 4.10%, but this is only available to premier customers.
Barclays has also launched a new mortgage proposition designed to help new and existing customers access larger loans when purchasing a home. The initiative, known as Mortgage Boost, enables family members or friends to effectively "boost" the amount that can be borrowed towards a property, without needing to lend or gift money directly or provide a larger deposit.
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Under the new scheme, a borrower’s eligibility for a mortgage can increase significantly by including a family member or friend on the application. For example, an individual with a £37,500 annual income and a £30,000 deposit might traditionally be able to borrow up to £168,375, enabling them to purchase a home priced at around £198,375.
However, with Mortgage Boost, if a second person — such as a parent — joins the application, the total borrowing potential can rise substantially. In this case, if the second applicant also earns £37,500 a year, the combined income could push the borrowing limit to £270,000, enabling the buyer to afford a home worth up to £300,000.
Nationwide (NBS.L) is offering a five-year fix at 4.34%, which comes with a £999 fee and requires a 40% deposit. This is unchanged from last week.
Nationwide's two-year fixed rate for home purchase is also unchanged at 4.34% and comes with a £999 fee — also for borrowers with a 40% deposit.
Halifax, the UK’s biggest mortgage lender, offers a five-year rate for 4.12% (also 60% LTV), which is below last week’s 4.17%.
The lender, owned by Lloyds (LLOY.L), has a two-year fixed rate deal coming in at 4.15%, with a £999 fee for first-time buyers, which is also lower than the previous 4.24%.
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It also offers a 10-year deal with a mortgage rate of 4.78%.
The lender announced the launch of a new 1.5-year fixed-rate remortgage product in response to growing demand among borrowers for shorter-term deals.
Shorter-term fixes offer certainty over monthly payments while also allowing households to switch to a new deal sooner to capitalise on lower rates.
With sub-4% mortgages making their way back into the market, prospective homeowners have reasons to smile when it comes to finding a good deal.
HSBC (HSBA.L) now has the cheapest deal in the market. However, the 3.98% offer requires a 40% deposit and premier client conditions so it is only for a selected few. Barclays (BARC.L), at 4.06% is probably a better bet for most prospective homeowners, but you will need a hefty amount of cash upfront to secure the deal.
Given the average UK house price sits at £366,189, a 40% deposit equates to about £147,000.
A growing number of homeowners in the UK are opting for 35-year or longer mortgage terms, with a significant rise in older borrowers stretching their repayment periods well into their 70s.
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Lender April Mortgages is offering buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, from a deposit of 5%. Both those buying alone and those buying with others can apply for the mortgage.
The company, which is part of an independent Dutch asset manager DMFCO, has interest rates starting at 5.20%, with an application fee of £195.
Skipton Building Society has also said it would allow first-time buyers to borrow up to 5.5 times their income, in an effort to support more borrowers on to the housing ladder.
Leeds Building Society is increasing the maximum amount that first-time buyers can potentially borrow as a multiple of their earnings, with the launch of a new mortgage range. Aspiring homeowners with a minimum household income of £40,000 may now be able to borrow up to 5.5 times their earnings.
Mortgage holders and borrowers have faced record-high repayments in recent years, as the Bank of England's base rate has been passed on by banks and building societies.
With 1.8 million fixed mortgage deals set to end in 2025, according to UK Finance, many homeowners will be hoping the Bank of England acts quickly to cut rates more aggressively. At the same time, savers will likely be rooting for rates to remain at or near their current levels.
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