Following the Bank of England’s decision to hold interest rates at 3.75%, nearly all major UK lenders, apart from Halifax, have increased mortgage rates this week. Data from Uswitch shows that the average two-year fixed mortgage now sits at 4.53%, slightly up from last week’s 4.49%. Meanwhile, the five-year fixed deal remains unchanged at 4.98% for a typical 75% loan-to-value (LTV) mortgage, requiring a deposit of at least 25% of the property value.
The Monetary Policy Committee’s 5-4 vote to maintain the base rate indicates that while rates are being held steady for now, a reduction could still occur in the near future. Four members of the committee preferred a cut to 3.5%, signalling potential relief for borrowers if economic conditions allow.
Alice Haine, personal finance expert at Bestinvest, commented that while holding rates may feel unsettling for homeowners and buyers, there is a positive side. She noted that six rate reductions since the summer of 2024, alongside a more relaxed lending environment and slower house price growth, have eased some affordability pressures, though occasional rate fluctuations are likely.
Many high-street lenders have raised mortgage rates recently, responding to expectations around future interest rate movements. However, rates are still considerably lower than the 6%-plus deals that were common in 2023. First-time buyers largely avoided the worst of that period, while homeowners finishing shorter-term fixed deals may now face increased repayments.
Barclays announced rate hikes of up to 0.15 percentage points this week, joining HSBC, Nationwide, NatWest, Virgin Money, and Santander in raising rates. Halifax was the only major lender to leave its mortgage rates unchanged. David Hollingworth from L&C Mortgages suggested that as more lenders increase rates, others may follow, creating gradual upward pressure across the market.
HSBC now offers a two-year fixed mortgage at 3.76% with a £999 booking fee for a 60% LTV product, up from 3.66% the previous week. Its five-year fixed deal remains at 3.88% with the same fee. Higher LTV options, such as 95%, come with increased rates, including a two-year fix at 4.74% and a five-year fix at 4.79%. HSBC has also launched a cashback offer of up to £2,000 to help borrowers with upfront costs, potentially increasing competition among lenders.
NatWest’s two-year fixed deal has risen to 3.59%, while its five-year option now stands at 3.73%. Both require a 40% deposit. Barclays’ two-year fixed rate has increased to 3.65%, with the five-year fix now at 3.90%. The bank has also introduced 95% LTV mortgages for new-build properties up to £600,000, helping first-time buyers reduce the deposit required.
Barclays’ Mortgage Boost initiative allows applicants to include a family member or friend on their application, effectively increasing the borrowing potential. For example, a couple with a combined income of £75,000 could afford a home worth up to £300,000, compared to £207,375 for a single applicant, making homeownership more accessible for many.
Nationwide has raised its two-year fix for first-time buyers to 3.82% and the five-year rate to 4.16%, both requiring a 40% deposit. The lender offers £500 cashback for first-time buyers and has expanded high loan-to-income (LTI) lending, allowing some borrowers to access significantly larger loans. Borrowers can now borrow up to six times their annual income under certain conditions.
Halifax has kept its two-year fixed mortgage at 3.72% and its five-year deal at 3.88%, remaining unchanged. Halifax also offers a ten-year fixed rate of 4.87%. Santander has withdrawn some 60% LTV products but continues to provide high-LTV options for first-time buyers, including a two-year fix at 4.10% and a five-year fix at 4.23%. Its “My First Mortgage” deal offers up to 98% LTV for first-time buyers, requiring just a £10,000 deposit on properties up to £500,000.
Deposit size and financial standing are critical factors for lenders when setting mortgage rates. Lower LTVs generally allow access to better deals, while higher LTVs carry increased costs to account for additional risk. Borrowers with larger deposits tend to secure more favourable interest rates.
Despite the recent rate increases, affordability has improved compared with 2023. Lower overall mortgage rates, slower house price growth, and more relaxed lending criteria have helped ease financial pressure on buyers, especially first-time buyers and those remortgaging after shorter-term fixes.
Building societies are also supporting borrowers. Skipton Building Society allows first-time buyers to borrow up to 5.5 times their income, while Leeds Building Society has reduced minimum income requirements for first-time buyers. These measures make it easier for a wider range of applicants to enter the property market.
With the Bank of England base rate remaining at 3.75%, homeowners and prospective buyers will be closely monitoring future decisions. While further cuts could reduce repayments, savers may prefer rates to remain stable to protect their income from deposit accounts.
Overall, the UK mortgage market is stabilising after a period of volatility. A variety of competitive options exist for borrowers, but careful planning is essential, particularly for those with high LTV mortgages or larger borrowing needs. Despite rate rises, many buyers still have opportunities to access more favourable deals.
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