Barclays has reduced its mortgage rates this week, even as a number of rival lenders have either raised theirs or kept them unchanged. The move comes after an unexpected rise in inflation dampened expectations of further Bank of England interest rate cuts this year.
According to figures from Uswitch, the average two-year fixed mortgage rate edged up to 4.7% from 4.68% the previous week. Meanwhile, the typical five-year fixed deal rose from 4.83% to 4.94%.
The Bank of England recently lowered its base rate to 4%, a decision aimed at easing pressure on households by reducing mortgage costs. However, new data published on Wednesday showed consumer price inflation climbing to 3.8% in the year to July, well above the central bank’s 2% target.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said the news would be discouraging for many borrowers. She explained that higher inflation affects affordability, weakens borrowing power, and makes it harder for first-time buyers or homeowners to progress on the property ladder.
She added that persistent price pressures could also slow down the pace of mortgage rate reductions. While affordability has improved slightly in recent months – helped by lower mortgage rates and relaxed stress test requirements – the progress is not as rapid as many buyers had hoped.
Despite this, Barclays moved to trim its rates this week, setting itself apart as some other leading banks opted to nudge theirs higher.
Barclays Cuts Mortgage Rates While Rivals Edge Theirs Higher
Barclays has announced reductions to a number of its mortgage products this week, setting itself apart from other high street lenders who have either raised rates or left them unchanged. The move comes as a surprise increase in inflation has weakened hopes of further Bank of England interest rate cuts this year.
Figures from Uswitch show that the average two-year fixed mortgage has crept up to 4.7%, compared with 4.68% last week. Meanwhile, the average five-year fix has risen from 4.83% to 4.94%.
Although the Bank of England recently lowered its base rate to 4% – bringing some relief to homeowners by trimming monthly repayments – fresh data has revealed that consumer price inflation climbed to 3.8% in the year to July. This remains well above the Bank’s 2% target.
According to Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the latest figures are discouraging for those with mortgages or hoping to buy. She explained that rising inflation erodes affordability and reduces the borrowing power of first-time buyers and homeowners alike.
She warned that persistent price pressures could delay further cuts in mortgage rates. While affordability has improved slightly in recent months, thanks to lower borrowing costs and lenders easing stress test requirements, progress has been slower than many had anticipated.
Despite the uncertainty, Barclays has chosen to reduce a wide range of its deals this week. Rival banks such as Santander, NatWest, HSBC, Nationwide and Halifax have instead adjusted some products upwards.
How the Major Lenders Compare
HSBC
HSBC continues to offer 95% loan-to-value (LTV) mortgages, requiring only a 5% deposit. However, the rates remain higher, with a two-year fix at 4.94% and a five-year fix at 4.79%. As with most lenders, the size of the deposit heavily influences the rate, with larger deposits allowing access to cheaper deals due to lower risk for the bank.
NatWest
NatWest’s five-year fixed rate is currently 3.85% with a £1,495 fee, unchanged from last week. Its lowest two-year fix remains at 3.73%. Both offers require at least a 40% deposit.
Santander
Santander has pushed up its rates for first-time buyers. A five-year fix now sits at 4.09%, compared with 3.94% the week before, with a £999 fee. For a two-year fix, the rate has increased from 3.82% to 3.94%, also with a £999 fee.
Barclays
Barclays’ five-year fixed deal now stands at 3.95% with an £899 fee, slightly down from 3.99% last week. Its two-year fix has dropped from 3.84% to 3.75%.
Other reductions include:
- 2-year fixes as low as 3.74% (60% LTV, £899 fee)
- 3-year fixes cut to 3.97% (60% LTV, no fee)
- 5-year fixes reduced to 3.85% for green home deals (60% LTV, £899 fee)
Barclays has also launched its Mortgage Boost scheme, designed to help buyers secure larger loans by including a family member or friend on the mortgage application. For example, a buyer earning £37,500 with a £30,000 deposit might normally be limited to borrowing £168,375 – enough for a £198,375 property. With a parent or partner earning the same amount added to the application, borrowing could increase to £270,000, opening the door to homes worth up to £300,000.
Nationwide
Nationwide has nudged its rates upwards, with a five-year fix for first-time buyers now at 4.19% and a two-year fix at 3.91%, both requiring a 40% deposit. However, it has also cut its Standard Mortgage Rate to 6.74% from September and reduced affordability stress rates, allowing many applicants to borrow more.
The lender, which supported more first-time buyers than any other in 2024, has also widened its “Helping Hand” scheme, enabling eligible buyers to borrow up to six times their income.
Halifax
Halifax, the UK’s biggest mortgage lender, has raised some of its deals. Its five-year fix is now 3.99% (up from 3.94%), while its two-year fix is 3.83% (up from 3.79%). A 10-year option is also available at 4.78%. Halifax has enhanced its five-year products to allow greater borrowing capacity, meaning some buyers could access up to £38,000 more.
Outlook for Buyers
While the Bank of England’s recent rate cut has eased pressure for some households, persistent inflation means that mortgage rates are unlikely to fall sharply in the near term. Buyers with larger deposits continue to benefit from the best deals, while schemes like Barclays’ Mortgage Boost and Nationwide’s Helping Hand aim to support those struggling with affordability.
For now, Barclays’ decision to lower rates stands out, offering a rare boost in an otherwise cautious mortgage market.
Cheapest mortgage deal on the market
NatWest remains one of the most competitive lenders in the market, offering some of the lowest rates on both two and five-year fixed deals. However, these products come with a significant hurdle – borrowers need a 40% deposit to qualify.
With the average UK house price standing at £298,237 in July, based on Halifax’s figures, this would mean saving nearly £120,000 just to meet the deposit requirement. For many aspiring buyers, this level of upfront cash is simply out of reach.
At the same time, more homeowners are choosing longer mortgage terms, with a sharp rise in borrowers extending repayments over 35 years or more. This trend is particularly noticeable among older buyers, who are now stretching their mortgages well into their 70s.
Some lenders are also changing their approach to help borrowers access larger loans. April Mortgages, backed by Dutch asset manager DMFCO, is offering buyers the ability to borrow up to seven times their income on fixed deals lasting between five and 15 years. This option is open to both individual buyers and joint applicants.
Their rates start from 5.05%, with a £195 application fee attached. Similarly, Skipton Building Society has said it will allow first-time buyers to borrow up to 5.5 times their income, making it easier for more people to secure a property.
Leeds Building Society has also joined in, launching a new mortgage range aimed at first-time buyers. Those with a household income of at least £30,000 can now potentially borrow up to 5.5 times their earnings, increasing their chances of getting onto the property ladder.
These shifts come as borrowers continue to deal with historically high repayments, driven by the Bank of England’s elevated base rate. The impact has been passed on directly by banks and building societies, leaving mortgage holders under significant financial pressure.
Looking ahead, 1.3 million fixed-rate mortgage deals are due to expire in 2025, according to UK Finance. Homeowners reaching the end of their current deals will be hoping for more substantial interest rate cuts from the Bank of England. On the other hand, savers are likely to prefer rates staying high to maintain stronger returns.
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