Major UK lenders have made a series of mortgage rate cuts in the run-up to a pivotal interest rate decision from the Bank of England, providing much-needed relief for homeowners and prospective buyers. However, despite these reductions, overall average mortgage rates have seen a slight uptick.
The average rate for a two-year fixed mortgage stands at 5.69%, a slight increase from the previous 5.29%, while five-year fixed deals average 5.54%, higher than the previous 5.24%, according to data from Uswitch.
Halifax has led the way, cutting rates by as much as 0.3 percentage points on remortgage deals. Home movers and first-time buyers, however, will see smaller reductions, with rates dropping by up to 0.11 percentage points. Other major banks have followed suit — HSBC (HSBA.L) and Clydesdale Bank both announced cuts to their rates, offering further relief to borrowers.
Clydesdale Bank's rate reductions, which took effect on Thursday, saw its two-year and five-year fixed rate mortgages drop by up to 0.28 percentage points. Meanwhile, HSBC will introduce similar changes on Friday, affecting a wide range of deals across both residential and buy-to-let products. While the new rates have not yet been disclosed, the bank confirmed it would apply cuts across its offerings.
Other lenders are following suit with similar reductions. Coventry Building Society has cut rates across all its fixed-rate deals by up to 0.27 percentage points, while Accord Mortgages, a subsidiary of Yorkshire Building Society, has announced a 0.25 percentage point reduction across its offerings.
The proportion of first-time buyers who believe now is a good time to purchase a property has doubled over the past year, according to research for the Building Societies Association (BSA).
A third (33%) of first-time buyers think now is a good time, compared with 16% in December 2023, the BSA said.
HSBC (HSBA.L) has a 4.19% 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 4.16%.
Looking at the two-year options, the lowest rate stands at 4.30% with a £999 fee, again unchanged.
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 5.69% or 5.29% 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 dropped its 4.07% rate for a five-year deal with a £1,495 fee, which was the cheapest on the market. That same deal now comes in at 4.23%, which is unchanged from the previous week.
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For a two-year fix, the cheapest deal comes in at 4.33%, 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 4.20% with a £999 fee, assuming you have a 40% deposit — higher than the previous 4.18%.
For a two-year deal, the cheapest customers can get is 4.28% with the same £999 fee, which is also lower than last week’s 4.33%.
A five-year fix at Barclays (BARC.L) comes in at 4.23%, which is lower than the previous 4.31%.
When it comes to two-year mortgage deals, the lowest you can get is 4.38%, also lower than last week’s 4.43%
Barclays has 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.
Sian McIntyre, managing director of life moments at Barclays, said: “Buying a first home is a hugely important step in life and one that has unfortunately become tougher for many in recent years. We know people feel like they have to make huge compromises in order to save for a large deposit, and that family may want to help but cannot afford to.
“Mortgage Boost can help answer these challenges, supporting people to buy their first home earlier and without giving up on their other dreams.”
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.
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Nationwide offers a two-year fixed rate for home purchase at 4.46% 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 4.20% (also 60% LTV), which is below last week’s 4.29%.
The lender, owned by Lloyds (LLOY.L) has a two-year fixed rate deal coming in at 4.35%, with a £999 fee for first-time buyers, which is also lower than the previous 4.43%.
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 mortgages below 4% no longer on the market, prospective homeowners are back to limited choices when it comes to finding a good deal.
HSBC (HSBA.L) has the cheapest deal on the market. However, its 4.19% offer requires a 40% deposit, so you will need a hefty amount of cash upfront to secure the deal. Santander (BNC.L) and Halifax are close behind, offering a 4.20% deal for a five-year fix.
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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.
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 increased 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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