Mortgage deals below 4% are rapidly disappearing as lenders respond to higher inflation and reduced expectations that the Bank of England (BoE) will cut rates significantly this year. Meanwhile, nearly half a million homeowners face an average monthly increase of £510 as their five-year fixed mortgage deals come to an end.
Currently, the average rate for a two-year fixed mortgage is 4.90%, while five-year fixed deals average 5.24%, according to Uswitch data. The BoE has recently cut interest rates from 4.5% to 4.25%, meaning homeowners on tracker mortgages could see their monthly payments drop by nearly £29 following the base rate reduction.
However, around 469,192 borrowers who took out mortgages during the pandemic in 2020, when average fixed rates were just 2.11%, are preparing for substantial payment hikes. This is because many will revert to their lender’s standard variable rate (SVR), which currently averages 7.13%, according to the Bank of England.
For these borrowers, monthly payments could jump to approximately £1,227 — an increase of £510 from their previous average of £717, based on a typical mortgage debt of £178,523. Over the course of a year, this rise amounts to nearly £6,124 extra, a 67% increase in mortgage costs.
This significant jump in payments is expected to put pressure on household budgets already stretched by rising living expenses. Financial advisers are urging those nearing the end of their fixed-rate deals to consider remortgaging, rather than automatically moving onto their lender’s often much higher SVR.
David Hollingworth, associate director at L&C Mortgages, warned that although some borrowers may hope to wait for rates to fall, this carries the risk of ending up on a much more expensive standard variable rate. He highlighted that with ongoing market uncertainty and fluctuating rates, the situation remains confusing for many borrowers.
Getting advice early can help homeowners secure a better mortgage deal, offering protection against sudden rate increases while still allowing time to reassess and benefit from any future rate drops.
The Consumer Price Index (CPI), the main measure of inflation, rose to 3.5% in the year to April, exceeding expectations and moving further away from the Bank of England’s 2% target.
This week, no major lenders reduced their mortgage rates; instead, many increased costs for first-time buyers as the market shifts away from the recent mini price war that pushed some deals below 4%.
In other news, a new mortgage product has been launched offering 100% financing, meaning borrowers can buy a home without a deposit. Gable Mortgages introduced this, following a similar product from April Mortgages.
HSBC mortgage deals
HSBC currently offers a five-year fixed mortgage deal at a rate of 3.93%, which remains unchanged from the previous week. For customers holding a Premier Standard account with HSBC, the rate is slightly lower at 3.90%.
For those considering a two-year fixed mortgage, the lowest available rate stands at 3.86%, accompanied by a £999 fee. This rate also hasn’t changed from the previous week.
Both the five-year and two-year rates are based on a 60% loan-to-value (LTV) ratio. This means buyers would need a deposit covering at least 40% of the property’s value to qualify.
HSBC also provides options for those with smaller deposits through its 95% LTV products. These allow buyers to get on the property ladder with just a 5% deposit, although the interest rates are notably higher. For example, a two-year fix is offered at 4.97%, and a five-year fix at 4.81%.
These rates reflect the borrower’s financial position and deposit size. Typically, the larger the deposit, the lower the LTV—enabling access to more competitive deals, as lenders see lower-risk borrowers more favourably.
NatWest mortgage deals
NatWest is currently offering a five-year fixed mortgage at a rate of 3.99%, which includes a £1,495 fee. This is a slight increase from last week’s offer of 3.88%.
Their most affordable two-year fixed deal has also risen, now sitting at 3.94% compared to 3.88% the previous week. In both cases, buyers need to have at least a 40% deposit to access these rates.
Over at Santander, the five-year fixed rate for first-time buyers is now 3.93% with a £999 fee—slightly higher than the previous rate of 3.91%. This deal also assumes a minimum deposit of 40%.
Santander’s two-year fixed rate stands at 3.90%, again with a £999 fee. This is up from last week’s offer of 3.87%, marking a continued trend of small rate increases across the market.
Barclays mortgage deals
Barclays has maintained its competitive position in the mortgage market, continuing to offer a five-year fixed rate at 3.89%. For those holding a “premier” account with the bank, the rate is slightly reduced to 3.88%. These rates remain unchanged from the previous week.
For two-year fixed mortgages, Barclays’ lowest rate currently stands at 3.87%, again unchanged from the week before.
The bank has also introduced a new initiative called “Mortgage Boost,” aimed at helping both new and existing customers secure larger loans when buying a home. This scheme allows a family member or friend to be added to a mortgage application to increase the total borrowing amount, without requiring them to contribute any money directly or provide a higher deposit.
Through Mortgage Boost, a buyer earning £37,500 with a £30,000 deposit might normally be eligible to borrow around £168,375—enough for a property worth approximately £198,375.
However, by including a second applicant—such as a parent—with the same income, the total borrowing capacity could rise to £270,000. This increase would allow the buyer to potentially purchase a home valued at up to £300,000, significantly expanding their options on the housing market.
Nationwide mortgage deals
Nationwide has slightly increased its mortgage rates for first-time buyers this week. The lender’s lowest rate for a five-year fixed deal is now 4.19%, up from last week’s 4.09%. For a two-year fix, first-time buyers are being offered a rate of 3.99%, compared to 3.94% previously.
In a move to improve borrowing capacity, Nationwide has updated its affordability assessment by lowering stress test rates. The reduction ranges between 0.75 and 1.25 percentage points, potentially allowing applicants to borrow more when buying their first home, moving property, or remortgaging.
On average, this change could boost borrowing power by around £28,000. In certain remortgage cases, customers might qualify to borrow up to £42,600 more than before.
Nationwide is applying these reduced stress rates to its general affordability checks as well as to specific products for first-time buyers and home movers taking out five-year fixed deals or longer. This adjustment is aimed at making homeownership more accessible in the current market climate.
Halifax mortgage deals
Halifax, the UK’s largest mortgage lender, has increased rates across some of its fixed-term mortgage products. Its five-year fixed rate now stands at 4.03% for borrowers with a 60% loan-to-value (LTV), up from 3.93% the previous week. Meanwhile, first-time buyers can access a two-year fix at 3.97%, subject to a £999 fee—an increase from last week’s 3.87%.
For those looking for long-term certainty, Halifax is also offering a 10-year fixed mortgage deal at a rate of 4.78%. These changes come as the lender, which is part of Lloyds Banking Group, adjusts its offering in line with current market trends.
In a bid to make mortgages more accessible, Halifax has improved borrowing limits on its five-year fixed products. Borrowers may now be able to access up to £38,000 more, helping them secure larger loans relative to their income.
Finance expert Rachel Springall from Moneyfacts commented on the wider market, noting that the growing number of low-deposit mortgage options will be welcomed by both remortgagers and first-time buyers. She added that the government has been encouraging lenders to support UK economic growth, and expanding mortgage availability is a step in that direction.
As lenders begin raising their rates, those hoping to get on the property ladder are finding that good mortgage deals are disappearing fast. Currently, Barclays is offering the most competitive five-year fixed rate at 3.89%, while HSBC leads on two-year fixes with a 3.86% rate. However, both require substantial deposits—40% in most cases.
With the average house price in the UK standing at £297,781, a 40% deposit equates to around £120,000. This high upfront cost makes it difficult for many buyers, particularly first-timers, to access the best deals on the market.
In response to affordability challenges, more UK homeowners are turning to longer mortgage terms. There has been a noticeable increase in people, especially older borrowers, taking out mortgages lasting 35 years or more, extending repayments into their 70s.
Lenders are adapting to this shift. April Mortgages, backed by Dutch asset manager DMFCO, now offers loans of up to six times the applicant’s income for fixed terms between five and 15 years. This product is available to both solo buyers and joint applicants, starting from a 5% deposit, with interest rates beginning at 5.20% and an application fee of £195.
Similarly, Skipton Building Society is allowing first-time buyers to borrow up to 5.5 times their income to help more people buy their first home. Leeds Building Society has launched a new mortgage range that follows the same path. Those with household incomes of £40,000 or more may now qualify to borrow up to 5.5 times their earnings.
In recent years, many mortgage holders have faced significantly higher monthly repayments. This is largely due to banks and building societies passing on the Bank of England’s base rate hikes to customers.
Looking ahead, UK Finance estimates that around 1.3 million fixed mortgage deals will expire in 2025. Many affected homeowners are hoping for substantial rate cuts from the Bank of England. However, this could create a dilemma, as savers may prefer interest rates to remain steady or fall only slightly to preserve returns on their savings.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property