The UK mortgage market has seen lenders take diverging approaches this week, with Barclays increasing the cost of its cheapest two and five-year fixed deals, while Halifax chose to reduce its lowest two-year fixed offer even further.
According to data from Uswitch, the average two-year fixed mortgage rate edged down slightly to 4.71%, from 4.74% the week before. In contrast, the average rate on five-year fixed products remained unchanged at 4.94%.
This comes shortly after the Bank of England lowered the base rate to 4%, a move expected to bring some relief to homeowners by trimming monthly mortgage repayments. However, this positive step has been tempered by the latest inflation figures, with the consumer price index (CPI) climbing to 3.8% in the year to July, still well above the Bank’s 2% target.
Commenting on the development, Alice Haine, a personal finance analyst at Bestinvest by Evelyn Partners, noted that the higher-than-expected inflation reading could weigh heavily on borrowers. She explained that rising inflation erodes affordability, making it harder for buyers and homeowners to borrow the amount they need or to move up the housing ladder.
She also highlighted that many had been hoping for sharper falls in mortgage rates, but ongoing price pressures may force the central bank to hold off on additional rate cuts. While affordability has improved recently thanks to lenders relaxing stress test rules and some modest reductions in mortgage costs, progress has been slower than many anticipated.
The pressure on households remains significant, with new research showing that borrowers are now spending close to half of their gross income on mortgage repayments. This marks one of the weakest levels of affordability since the global financial crisis of 2008.
Data from Moneyfacts revealed that even with a reasonable deposit, the average buyer who purchased in the past few years is committing nearly 50% of their pre-tax earnings to housing costs. The figures reflect the persistent mismatch between wage growth and house price inflation, sparking renewed debate about the sustainability of the UK property market.
For context, back in 2000, the average home in Britain cost around £78,000, approximately five times the average salary of £15,800. Fast forward to 2025, and the typical property price has reached £269,000, which is roughly seven times the average income of £37,600. This ratio far exceeds traditional lending limits that lenders have historically adhered to.
Over the past 25 years, earnings have risen by 237%, but house prices have soared by 345%. Had wages increased at the same pace as property values, today’s average salary would be above £54,000 instead of £37,600.
To put this into perspective, Moneyfacts offered an everyday comparison: if essentials such as bread and eggs had risen in line with house prices, a loaf of bread would now cost £2.28 and a dozen eggs £4.73.
Even with some lenders easing rates slightly, the affordability challenge is still clear. For example, someone taking out a highly competitive two-year fixed mortgage at 90% loan-to-value, priced at around 4.20%, might save about £100 per month compared to previous higher rates.
Despite these savings, the average repayment still consumes around 38% of gross income – a level last seen in mid-2018. For many households, this remains an uncomfortable burden.
Adam French, head of news at Moneyfacts, stressed that while affordability has improved a little compared to last year, the reality is that homeownership remains out of reach for many people. Rising rents and the challenge of saving for large deposits add to the strain, while those who do manage to secure a mortgage often find repayments swallowing nearly half of their pay – the toughest conditions since the 2008 financial crash.
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HSBC Mortgage Rates
HSBC has kept its mortgage rates unchanged this week. Its standard five-year fixed deal remains at 3.90%, while Premier Standard customers can access a slightly lower rate of 3.87%.
For those considering a two-year fix, the rate stays at 3.78%, though it comes with a £999 fee. Both offers apply to borrowers with a 60% loan-to-value (LTV), which means a 40% deposit is required.
HSBC also has options for buyers with smaller deposits, including 95% LTV mortgages that require only 5% upfront. However, these come at higher costs, with rates of 4.94% for a two-year fix and 4.79% for a five-year fix. This reflects the higher risk for lenders when deposits are smaller.
NatWest Mortgage Rates
NatWest has kept its deals steady as well. Its five-year fixed rate is currently 3.94%, with a £1,495 fee attached. The cheapest two-year fix sits at 3.88%, also unchanged from last week. Both products require buyers to have a 40% deposit to qualify.
Santander Mortgage Rates
At Santander, first-time buyers can secure a five-year fixed mortgage at 4.09%, with a £999 fee. For those looking at a two-year deal, the rate stands at 3.94%, also with a £999 fee. Both rates are unchanged from last week.
That said, Santander has raised some products aimed at first-time buyers. Two-year fixes at 75%-90% LTV have risen by up to 0.10%, while five-year fixes in the same bracket increased by up to 0.11%. Meanwhile, 10-year fixed deals at 60%-75% LTV climbed by 0.07%.
Barclays Mortgage Rates
Barclays has moved in the opposite direction, increasing its rates. Its five-year fix is now 4.05%, up from 3.95% the week before, with a £899 product fee. Similarly, its two-year fix has risen to 3.85% from 3.75%.
The bank has also introduced its “Mortgage Boost” initiative, designed to help buyers borrow more. By adding a family member or friend to the mortgage application, a borrower’s potential borrowing power increases.
For example, someone earning £37,500 with a £30,000 deposit might normally be able to borrow around £168,375. With Mortgage Boost, if a second applicant also earns £37,500, the borrowing limit could rise to £270,000—enabling a purchase of up to £300,000.
Nationwide Mortgage Rates
Nationwide has held its core rates steady this week. Its five-year fixed mortgage for first-time buyers sits at 4.14%, while the two-year equivalent remains at 3.86%. Both products come with a £1,499 fee and require a 40% deposit.
However, some Nationwide customers will see a reduction in costs. From 1 September 2025, the lender’s Standard Mortgage Rate (SMR) has dropped by 0.25%, bringing it down to 6.74%. Tracker mortgage customers will also benefit automatically as their payments fall in line with the recent Bank of England rate cut.
Nationwide has also made its mortgages more accessible by lowering salary requirements. Now, single applicants earning £30,000 (down from £35,000) and joint applicants with £50,000 (down from £55,000) can qualify, supporting an estimated 10,000 extra first-time buyers each year.
The lender is also expanding its high loan-to-income lending capacity through its “Helping Hand” scheme. This allows some buyers to borrow up to six times their annual income—33% more than standard lending rules—helping many get on the ladder.
Additionally, adjustments to affordability checks, including lower stress test rates, mean borrowers can now access an average of £28,000 more. In some remortgage cases, the figure could be as high as £42,600.
Halifax Mortgage Rates
Halifax, part of Lloyds Banking Group, is currently offering a five-year fixed deal at 3.99% with a 60% LTV. This remains unchanged from last week.
For two-year fixes, the lender has made cuts, bringing the rate down to 3.83% with a £999 fee for first-time buyers, compared with 4.09% previously. Halifax also offers a 10-year deal at 4.87%.
The bank has further improved its five-year fixed mortgage products by raising borrowing limits. With this change, borrowers may be able to access up to £38,000 more, giving them greater flexibility in the housing market.
Cheapest mortgage deal on the market
HSBC has overtaken NatWest to offer the lowest five-year fixed mortgage deal among the major lenders, coming in at 3.90%. For shorter-term borrowing, HSBC also leads with its two-year fix at 3.78%. Both, however, require buyers to put down a substantial 40% deposit.
With Nationwide reporting the average UK property price at £271,079 in August, this means a deposit of more than £108,000 would be needed to access these headline rates.
At the same time, an increasing number of homeowners are turning to longer repayment terms. More borrowers are choosing mortgages of 35 years or more, with some stretching repayments well into their seventies.
One lender, April Mortgages, is offering buyers the ability to borrow up to seven times their income, provided they take out a fixed loan running between five and 15 years. This product is open to both individual applicants and joint buyers.
Backed by Dutch asset manager DMFCO, April Mortgages offers interest rates beginning at 5.05% and charges an application fee of £195.
Elsewhere, Skipton Building Society has also raised its maximum income multiple to 5.5 times annual earnings for first-time buyers. This move is aimed at widening access to the housing market.
Leeds Building Society has followed suit by launching a new mortgage range. Under the changes, first-time buyers with a household income of at least £30,000 can now borrow up to 5.5 times their annual earnings.
For many borrowers, affordability has become increasingly strained in recent years. Higher repayments have been fuelled by the Bank of England’s elevated base rate, which lenders have passed on to customers.
Looking ahead, the situation could tighten further. UK Finance has revealed that around 1.3 million fixed-rate mortgage deals will expire in 2025. This means a significant number of households will soon be facing higher repayments unless rates fall.
Homeowners will be watching closely to see if the Bank of England chooses to accelerate interest rate cuts in the coming months. Any easing would offer much-needed relief to households managing expensive mortgages.
On the other hand, savers may prefer rates to remain at current levels, as higher interest continues to support returns on savings accounts.
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