Every major lender is now offering deals under 4%, giving some respite for borrowers as the Bank of England (BoE) cuts interest rates. However, higher-than-expected inflation could make the relief short-lived.
The average rate for a two-year fixed mortgage stands at 4.93%, while five-year fixed deals average 5.24%, according to data from Uswitch.
The Bank of England has cut interest rates from 4.5% to 4.25%, meaning the average homeowner on a tracker mortgage will see their monthly repayments fall by nearly £29, after the quarter-point snip to the base rate.
UK Finance said homeowners on tracker deals will typically see their monthly repayments reduced by £28.97, based on outstanding balances. This could add up to a savings of nearly £350 over the course of a year.
The primary inflation measure, the Consumer Price Index (CPI), stood at 3.5% in the 12 months to April, a higher-than-expected increase from the previous month. That means price increases are moving away from the BoE's 2% target.
Peter Stimson, director of mortgages at the lender MPowered, said: “We expected a jump, but what we got was a leap — in both headline and core inflation. “The surge in inflationary pressure won’t just translate into a slowdown in base rate cuts. We’re in ‘handbrake on' territory.
“For anyone planning to buy their first home or remortgage this summer, (...) inflation data will come as a blow.
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“For now, mortgage rates have fallen as far as they can, and we may even see them creep up over the next few weeks as lenders recalibrate their pricing in response to rising swap rates.”
This week, HSBC (HSBA.L) and Santander (BNC.L) have cut rates deeper into sub-4% territory, while other major lenders have kept their deals unchanged.
A new mortgage has been launched offering the chance to borrow 100% of a property's value — the second such deal in less than a week.
Gable Mortgages provides home loans that don't require the borrower to put down any deposit. It follows April Mortgages' launch of a similar 100% product last week.
HSBC (HSBA.L) has a 3.93% rate for a five-year deal, unchanged from the previous week. For those with a Premier Standard account with the lender, this rate is 3.90%.
Looking at the two-year options, the lowest rate is 3.86% with a £999 fee, lower than last week's 3.91%.
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. However, the rates are much higher, with a two-year fix coming in at 4.97% or 4.81% for a five-year fix.
This is because their financial situation and deposit size determine the rate someone can get. 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 3.88% with a £1,495 fee. No changes from last week.
The cheapest two-year fix deal is 3.88%, again untouched from the previous week. In both cases, you'll need at least a 40% deposit to qualify for the rates.
At Santander (BNC.L), a five-year fix is 3.91% for first-time buyers, lower than the previous 3.99%. It has a £999 fee, assuming a 40% deposit.
Read more: Average first-time buyers in London need almost £140,000 for a deposit
For a two-year deal, customers can also secure a 3.87% offer, with the same £999 fee, which is also lower than the previous 3.89%.
Barclays (BARC.L) was the first among major lenders to bring back under-4% deals and currently has a five-year fix at 3.89%, unchanged from last week. For "premier" clients, this rate drops to 3.88%.
The lowest you can get for two-year mortgage deals is 3.87%, also unchanged.
Barclays has launched a mortgage proposition 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 toward a property without needing to lend or gift money directly or provide a larger deposit.
Under the 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, the total borrowing potential can rise substantially if a second person — such as a parent — joins the application. 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’s (NBS.L) lowest mortgage rate now stands at 3.84%, which is available to new and existing customers who are looking to move to a new home. This rate is available on both the two-year and five-year fixed rate products.
For the first time since September 2024, Nationwide will be offering sub-4% rates for first-time buyers. The lowest first-time buyer rate is 3.94% and available on a two-year fixed rate product at 60% loan-to-value (LTV) with a £1,499 fee. First-time buyers can also get 3.99% on the same 60% LTV, two-year fixed rate product but with a lower £999 fee.
For a five year fix, first-time buyers are currently looking at 4.09%.
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The lender has announced it is adjusting its mortgage affordability calculation by reducing its stress rates by between 0.75 and 1.25 percentage points, helping applicants to borrow more — whether buying a first home, moving or remortgaging.
Applicants will be able to borrow, on average, £28,000 more from today, however in some remortgage cases customers could borrow up to £42,600 more.
Nationwide is reducing both its standard stress rate and the rate applied to eligible first-time buyers and home movers fixing their deal for at least five years.
Halifax, the UK’s biggest mortgage lender, offers a five-year rate of 3.93% (also 60% LTV), unchanged from the previous week.
The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate deal at 3.87%, with a £999 fee for first-time buyers, which is also unchanged.
It also offers a 10-year deal with a mortgage rate of 4.78%.
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The lender has enhanced its five-year fixed mortgage products by increasing borrowing capacity. This improvement allows borrowers to access up to £38,000 more, enabling them to secure larger mortgages based on individual incomes.
Rachel Springall, finance expert at Moneyfacts, said: "The flourishing choice of low-deposit mortgages will no doubt be welcomed by borrowers who are either looking to remortgage or are a first-time buyer.
"The government has been clear that it wants lenders to do more to boost UK growth, and so a rise in product availability for aspiring homeowners is a healthy step in the right direction."
Amid this mini price war between mortgage providers, prospective homeowners have some better options. NatWest's (NWG.L) 3.88% is currently the cheapest deal for five-year fixes, while Halifax, Barclays (BARC.L) and Santander (BNC.L) all offer the cheapest deal for two-year fixes among at 3.87%, though access requires a hefty 40% deposit.
The average UK house price is £297,781, so a 40% deposit equates to about £120,000.
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 offers 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 buying alone and those buying with others can apply for the mortgage.
As part of the independent Dutch asset manager DMFCO, the company offers interest rates starting at 5.20% and 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 to help more borrowers get on 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.
According to UK Finance, 1.3 million fixed mortgage deals are set to end in 2025. Many homeowners will hope the Bank of England acts quickly to cut rates more aggressively. At the same time, savers will likely root for rates to remain at or near their current levels.
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