A mini mortgage price war is now fully underway, with major lenders cutting rates as low as 3.75%. This comes as both the government and the Bank of England (BoE) encourage more relaxed lending practices to boost the housing market.
According to data from Uswitch, the average rate for a two-year fixed mortgage is currently 4.68%, while five-year fixed deals sit at an average of 4.97%. It marks the first time this year that both averages have dipped below the 5% mark.
However, despite growing hopes for a drop in borrowing costs, the Bank of England has held its base interest rate steady at 4.25%, citing ongoing concerns about inflation. The Consumer Price Index (CPI), a key indicator of inflation, stood at 3.6% in the 12 months to June—well above the BoE’s target of 2%.
In an effort to improve access to the housing market, Chancellor Rachel Reeves has announced a set of new policies. One key proposal would allow renters with a strong history of regular payments to use this record as proof of affordability when applying for a mortgage—potentially bypassing the need for a deposit.
Additionally, Reeves is set to roll out a permanent mortgage guarantee scheme. This initiative aims to support more prospective buyers in climbing onto the property ladder.
The BoE has also taken steps to ease lending restrictions. Previously, less than 10% of new mortgages could be issued at loan amounts exceeding 4.5 times a borrower’s income. This threshold has now been raised to 15% across the mortgage industry, allowing lenders more flexibility. Some banks and building societies are even permitted to go beyond this limit.
The central bank estimates that this adjustment could lead to around 36,000 additional high loan-to-income mortgages being granted each year.
In support of these changes, Nationwide—one of the UK’s largest building societies—has lowered the income threshold for first-time buyers. The requirement has been reduced from £35,000 to £30,000, which the lender says could help around 10,000 more people become homeowners.
Several high street banks have also joined the rate-cutting trend. This week, HSBC, Santander, Barclays, and Halifax all slashed mortgage rates—some dipping below the 4% mark for buyers who can provide a 40% deposit.
HSBC mortgage deals
HSBC has trimmed its mortgage rates, with its five-year fixed deal now at 3.94%, slightly lower than last week’s 3.98%. For customers who hold a Premier Standard account with the bank, the rate is even better at 3.91%.
For those considering a two-year fixed option, HSBC is offering a rate of 3.82% with a £999 fee—down from the previous rate of 3.85%. These offers are based on a 60% loan-to-value (LTV) mortgage, meaning buyers must have at least a 40% deposit to qualify.
HSBC is also offering products for buyers with smaller deposits, including 95% LTV deals. These require just a 5% deposit, though the rates are noticeably higher. A two-year fix comes in at 4.99%, while a five-year fix is slightly lower at 4.79%.
The difference in rates is tied to the buyer’s financial circumstances and the size of their deposit. Generally, the bigger the deposit, the lower the LTV ratio. This means the borrower poses less risk to the lender, making them eligible for more competitive rates.
Over at NatWest, their five-year fixed mortgage remains unchanged this week at 3.90%, with a fee of £1,495. The lowest two-year fixed rate is also stable at 3.81%. As with HSBC, these deals require at least a 40% deposit to be eligible.
Santander mortgage deals
At Santander, the five-year fixed mortgage rate for first-time buyers has increased slightly to 4.01%, up from last week’s 3.98%. This deal includes a £999 fee and assumes a 40% deposit.
If you’re looking at a shorter term, Santander’s two-year fixed deal is now 3.84%, down from 3.90% the week before. It also comes with a £999 fee and is available to those with a 40% deposit.
Barclays, meanwhile, continues to stir up the mortgage market. The bank was among the first major lenders to bring back sub-4% deals and is now rolling out even more rate cuts from this Friday.
Their five-year fix is dropping from 3.99% to 3.91%, while the most competitive two-year deal is being slashed from 3.89% to just 3.75%. This positions Barclays as one of the most aggressive lenders in the current rate war.
Other changes to Barclays’ product lineup include:
- A 2-year fix at 60% LTV with an £899 fee falling from 3.89% to 3.76%
- A fee-free 2-year fix at 60% LTV decreasing from 4.09% to 4.03%
- A 2-year fix at 75% LTV with an £899 fee dropping from 4.05% to 3.93%
- Premier and standard 5-year fixes also seeing reductions, with the Premier rate falling from 3.98% to 3.90%, and the standard fix from 3.99% to 3.91%
Several three-year deals are also being cut, with rates now ranging from 4.02% to 4.07% depending on the LTV and whether the product includes a fee.
In addition to cutting rates, Barclays has introduced a new scheme called Mortgage Boost. This initiative is designed to help both new and existing customers borrow more when buying a home by including a family member or friend on the mortgage application.
The idea behind Mortgage Boost is that the income of a second person can be factored into the borrowing assessment without them needing to contribute a deposit or lend money directly.
For instance, a buyer earning £37,500 with a £30,000 deposit could normally borrow up to £168,375—enough for a property worth around £198,375. However, if a second person earning the same amount joins the mortgage application, the borrowing capacity could rise to £270,000, allowing them to purchase a home valued at £300,000.
This scheme is especially useful for first-time buyers and younger applicants whose income alone might not stretch far enough in today’s property market.
Nationwide mortgage deals
Mortgage Rates Continue to Shift as Major Lenders Introduce New Deals for Homebuyers
Mortgage rates in the UK are continuing to shift, with several major lenders updating their fixed-rate deals to offer more competitive options—especially for those with larger deposits. Here’s a round-up of what some of the country’s biggest lenders, including HSBC, NatWest, Santander, Barclays, and Nationwide, are now offering.
HSBC Lowers Rates Across Popular Mortgage Deals
HSBC has slightly reduced its five-year fixed mortgage rate to 3.94%, down from last week’s 3.98%. Customers with a Premier Standard account can access an even lower rate of 3.91%.
For two-year fixed rate deals, the lowest offer from HSBC is now 3.82% with a £999 fee—this is a modest drop from the previous rate of 3.85%. These rates assume a loan-to-value (LTV) ratio of 60%, meaning borrowers need a deposit of at least 40%.
However, HSBC is also offering higher LTV options for those with smaller deposits. For instance, customers can access 95% LTV deals—ideal for those with just a 5% deposit—but the rates are much higher. These include a two-year fix at 4.99% and a five-year fix at 4.79%.
This highlights the importance of deposit size. The larger your deposit, the smaller the risk to lenders, which often results in better deals and lower interest rates.
NatWest Keeps Rates Steady But Still Offers Strong Deals
NatWest has held its rates steady this week. Their five-year fixed rate remains at 3.90% with a £1,495 fee, and their lowest two-year fixed deal is unchanged at 3.81%. Like HSBC, these deals are only available to those with at least a 40% deposit.
While these rates haven’t moved recently, they are still competitive in today’s market, particularly for borrowers looking for long-term stability.
Santander Makes Small Adjustments to Rates
Santander has slightly increased its five-year fixed rate for first-time buyers. It now sits at 4.01%, up from 3.98% the previous week. This rate comes with a £999 fee and is only available for those with a 40% deposit.
On the other hand, Santander has reduced its two-year fixed offer to 3.84%, down from 3.90%, giving short-term borrowers something to consider if they’re shopping around.
Barclays Leads with Aggressive Rate Cuts and Mortgage Boost Initiative
Barclays has taken a more aggressive stance, leading the way in what many are calling a mortgage rate war. From this Friday, the bank is rolling out a wide range of cuts, bringing several of its fixed rates below 4%.
For example, its five-year fixed rate will be reduced from 3.99% to 3.91%, while the lowest two-year fixed rate will fall from 3.89% to 3.75%—one of the most competitive rates in the market at the moment.
The lender is also updating a variety of its fixed-rate products across different deposit levels, from 60% to 75% LTV. These changes include:
- A drop from 4.09% to 4.03% for a 60% LTV two-year fixed with no product fee
- A five-year Premier fix at 60% LTV with a £899 product fee falling from 3.98% to 3.90%
- A 75% LTV two-year fixed deal going from 4.05% to 3.93%
These updates provide more choice and flexibility for borrowers at various deposit levels.
Barclays is also introducing its “Mortgage Boost” initiative. This programme allows family or friends to support a borrower’s application by adding their income to boost affordability, without giving or lending money. For instance, a borrower earning £37,500 with a £30,000 deposit could increase their borrowing capacity from £168,375 to as much as £270,000 if a parent or family member earning the same joined the application.
This initiative aims to help more buyers—particularly younger ones—get on the property ladder in today’s difficult housing market.
Nationwide Expands Lending Criteria to Support More First-Time Buyers
Nationwide is also stepping up its efforts to support first-time buyers. The lender now offers a five-year fixed mortgage at 4.14%, and a two-year fixed rate at 3.94%, both requiring a 40% deposit and a £1,499 fee.
In addition, Nationwide has lowered its income requirements to qualify for a mortgage. Previously, a solo applicant needed a £35,000 salary, but now only £30,000 is required. For joint applicants, the minimum combined income has been reduced from £55,000 to £50,000. This change is expected to help around 10,000 additional first-time buyers each year.
Nationwide, the UK’s top lender to first-time buyers in 2024, has also applied to the Prudential Regulation Authority for approval to increase its capacity for high loan-to-income lending.
Much of this high LTI lending is carried out under Nationwide’s Helping Hand programme. This scheme allows eligible first-time buyers to borrow up to six times their income, helping them borrow up to 33% more than traditional lending would allow. Since launching in 2021, Helping Hand has supported around 60,000 buyers.
Moreover, Nationwide has eased its affordability calculations by reducing mortgage stress test rates by between 0.75 and 1.25 percentage points. This change means borrowers can now access, on average, £28,000 more. In some remortgage cases, that figure could rise to as much as £42,600.
Final Thoughts
The mortgage market is currently shifting, with rates creeping downward across several lenders and new schemes being introduced to widen eligibility. For buyers with larger deposits, there are plenty of competitive deals available—some even dipping below the 4% mark.
First-time buyers, in particular, should pay close attention to initiatives like Barclays’ Mortgage Boost and Nationwide’s Helping Hand, which aim to improve access to homeownership.
As competition among lenders heats up, it’s more important than ever to shop around, consider your deposit size, and explore any additional schemes that may help stretch your borrowing power.
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