Major UK lenders are opting for a wait-and-see approach on mortgage rates, holding off on any significant changes as they await the Bank of England’s upcoming interest rate decision next week.
The average rate for a two-year fixed mortgage stands at 5.54%, while five-year fixed deals average 5.54%, both slightly higher from the previous week, according to data from Uswitch.
The Bank of England 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. However, as inflationary pressures continue to mount, analysts expect the Bank to keep rates unchanged at its next Monetary Policy Committee meeting on 20 March.
This week, HSBC (HSBA.L) UK has made cuts to mortgage rates, affecting a wide range of residential deals across different loan-to-value (LTV) bands and buyer categories. The bank has implemented reductions of up to 0.20% on two-year fixed rate mortgages and 0.17% on five-year fixed rates.
These adjustments follow HSBC’s recent changes to its lending policy for foreign nationals, aligning the rules for those with indefinite leave to remain with those applicable to UK residents. Additionally, the bank has reduced its standard variable rate by 0.25%, bringing it down to 6.74%.
The rate cuts come at a time when the amount owed on UK mortgages has hit a record high. Official data from the Bank of England shows that, in the final quarter of 2024, the outstanding balance of all residential mortgages reached £1,678.2bn — its highest level since data collection began nearly 20 years ago.
This surge has been driven by property buyers, especially first-time buyers, who have continued to push ahead despite ongoing economic uncertainty and affordability challenges.
Read more: UK house prices expected to rise as buyer demand slows ahead of stamp duty increases
While mortgage rates have seen a decline, borrowers are finding that they have less time to secure deals before they disappear from the market. New data from Moneyfacts revealed that the average shelf-life of a mortgage dropped from 36 days in February to just 16 days in March.
Rachel Springall, a finance expert at Moneyfacts, said: "The rate-cutting momentum was prevalent during February, with the average two- and five-year fixed rates seeing their biggest cuts in almost six months.
"Such fierce competition in the aftermath of a typically subdued time of year showed a mix of moves, but it led to the average shelf-life of a mortgage plummeting."
Springall added that the sharp drop in mortgage shelf life was influenced by volatility in swap rates and the Bank of England’s base rate.
HSBC (HSBA.L) has a 4.07% rate for a five-year deal. This is unchanged from the previous week. For those who have a Premier Standard account with the lender, this rate comes in at 3.98%.
Looking at the two-year options, the lowest rate stands at 4.12% with a £999 fee, lower than the previous 4.19%.
Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit.
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 5.39% or 5.08% 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.
Oli O’Donoghue, HSBC UK’s head of mortgages, said: “We are continually evolving to help people with their homebuying aspirations, whether that is someone buying their first home to help provide financial security for their family, someone coming to the UK from abroad and putting down roots or someone looking to take on a Buy To Let property to supplement their income.
Read more: UK house prices expected to rise as buyer demand slows ahead of stamp duty increases
“There is still strong demand in the Buy To Let market, and by increasing the maximum LTV on our range up to 80%LTV we are making purchasing a Buy To Let property more accessible to people and providing greater flexibility, enabling a reduced deposit and increasing the borrowing power of the applicant.”
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. In both cases, you'll need at least a 40% deposit to qualify for the rates.
At Santander (BNC.L), a five-year fix comes in at 4.13%, unchanged from the previous week, with a £999 fee, assuming you have a 40% deposit.
For a two-year deal, customers can also secure a 4.23% offer, with the same £999 fee, which is also unchanged.
In addition to maintaining its current rate offerings, Santander has expanded its product range to support first-time buyers. The bank has introduced new fixed-rate deals for first-time buyers with loan-to-value (LTV) ratios ranging from 60% to 95%. These include options for two-, three-,five- and 10-year terms, as well as a two-year tracker mortgage. Notably, these new deals come with flexible product fees — either £999 or £0 — depending on the option chosen.
Santander has also introduced new mortgage products tailored to first-time buyers with large loans, featuring two- and five-year fixed-rate deals at 60% LTV, albeit with a higher £1,999 product fee.
Additionally, the bank is catering to first-time buyers purchasing new-build properties with the launch of new range of 60% to 95% LTV three-year fixed deals. Options available with a £999 or £0 product fee.
A five-year fix at Barclays (BARC.L) comes in at 4.06%, which is untouched from the previous week. For "premier" clients this rate drops to 3.99%.
When it comes to two-year mortgage deals, the lowest you can get is 4.11%, also unchanged from last week’s deal.
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.
Read more: Best credit card deals of the week
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 offers a two-year fixed rate for home purchase at 4.34% with a £999 fee — also for borrowers with a 40% deposit. Again, unchanged from the previous week.
Halifax, the UK’s biggest mortgage lender, offers a five-year rate for 4.12% (also 60% LTV), which is unchanged from the previous week.
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 unchanged.
Read more: How to negotiate house prices
It also offers a 10-year deal with a mortgage rate of 4.78%.
The lender has 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 basically off the market unless you’re a premium client, prospective homeowners do not have a lot of reasons to smile when it comes to finding a good deal.
Barclays currently has the cheapest deal on the market. However, its 4.06% offer requires a 40% deposit, so 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.
Read more: UK house prices rise at fastest pace in nearly two years
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.
Read more:
