HSBC has announced reductions on a number of its mortgage products this week, while most other high-street banks and building societies have chosen to leave their deals unchanged. The decision comes at a time when hopes for more Bank of England (BoE) rate cuts in 2024 are starting to fade, as economic data continues to signal persistent inflationary pressures.
New figures from comparison site Uswitch revealed that the average two-year fixed mortgage has eased slightly, dropping to 4.75% from 4.81% a week earlier. At the same time, the typical five-year fix has also edged lower, now standing at 4.99% compared with 5.03% previously. These averages are based on 75% loan-to-value (LTV) mortgages, where borrowers are required to put down at least a quarter of the property’s value as a deposit.
This small adjustment in mortgage pricing follows the BoE’s decision in September to keep the base rate unchanged at 4%. Many in the market had been expecting further reductions this year, but with the Bank holding steady, lenders are now split between trimming their own rates to attract business or maintaining them at existing levels.
The reluctance to reduce rates more aggressively comes down to inflation. The consumer prices index (CPI) rose by 3.8% in the year to August, the same as July. While this figure marks a considerable improvement from the highs of recent years, it remains well above the BoE’s 2% target. The lack of movement in inflation has cooled market expectations that additional rate cuts will be announced before the end of the year.
Commenting on the situation, Alice Haine, a personal finance analyst at Bestinvest by Evelyn Partners, explained that although mortgage rates have dropped over the past year following several BoE cuts, the path ahead remains uncertain. She noted that lenders are cautious and that much will depend on how quickly inflation begins to move closer to target.
Haine added that certain lending initiatives are helping first-time buyers cope in the current market. The introduction of more flexible affordability tests, an increase in low-deposit mortgage options, and the availability of longer loan terms are giving some new buyers a chance to step onto the ladder despite high costs.
However, existing homeowners are facing more challenges. Those who locked into ultra-low fixed-rate deals in previous years are now emerging into a very different environment. When they come to remortgage, many will see their monthly repayments rise sharply unless they have been able to reduce their outstanding balance substantially in advance.
To prepare for this, Haine suggested that borrowers with deals ending soon should consider making higher repayments now if their finances allow. By cutting down the capital owed, households can soften the impact of the higher interest rates they are likely to encounter when switching to a new deal.
Despite the uncertainty, the housing market has shown some resilience. Nationwide’s latest data revealed that the average UK house price rose to £271,995 in September. This represented a monthly increase of 0.5%, above forecasts of 0.2%. Annual growth, however, remained relatively subdued at 2.2%, just slightly higher than the 2.1% recorded in August.
According to Matt Swannell, chief economic advisor at the EY ITEM Club, the housing market is likely to see only modest growth moving forward. While recent strong pay rises have improved affordability for some, slowing real income growth and the prospect of mortgage rates creeping back up could limit future demand.
In terms of specific lender deals, HSBC is now offering a five-year fixed rate at 3.99% with a £999 fee, or 3.96% for Premier account holders, both requiring a 40% deposit. Its two-year fixed product has also been reduced to 3.84%, down from 3.89% last week, again with a £999 fee attached.
For those with smaller deposits, HSBC provides 95% LTV deals, meaning buyers only need to save 5%. However, these come with higher rates: 4.96% for a two-year fix and 4.87% for a five-year fix. The difference highlights how deposit size remains crucial, with larger down payments unlocking much more competitive terms.
Other major banks are largely holding their positions. NatWest’s five-year fix remains unchanged at 4.02%, with its two-year fix at 3.94%. Barclays also kept its deals steady, with a two-year fix at 3.92% and a five-year fix at 4.11%. Barclays’ “Mortgage Boost” scheme, however, continues to attract attention, as it allows family members or friends to join an application, effectively boosting the amount a buyer can borrow.
Nationwide has kept its two-year and five-year fixes for first-time buyers at 4.04% and 4.27% respectively, with a £999 fee and a 40% deposit requirement. The lender’s “Helping Hand” programme, which enables some first-time buyers to borrow up to six times their income, continues to support thousands in entering the housing market.
Halifax remains the standout lender in terms of headline rates, with the cheapest two- and five-year fixed products among the big names—3.82% and 3.97%. Santander, meanwhile, recently withdrew a popular two-year product for certain first-time buyers, citing changes in swap rates following the BoE’s decision to keep interest rates steady.
Beyond the main banks, building societies are also adjusting their offerings. Skipton Building Society now permits first-time buyers to borrow up to 5.5 times their income, while Leeds Building Society has lowered its minimum household income requirement to £30,000 for certain mortgage ranges. These moves are designed to improve access to the market, especially for younger buyers.
With around 1.3 million fixed-rate mortgage deals set to expire this year, many households are bracing for higher repayments. Borrowers are keen to see further cuts to the BoE’s base rate, though savers will likely prefer that rates remain where they are to maintain returns on deposits.
The picture remains mixed. While HSBC’s move brings some relief, many lenders are cautious about making changes, reflecting the uncertainty around inflation and monetary policy. For homeowners and first-time buyers alike, the coming months will be a balancing act between affordability, borrowing limits and future expectations on interest rates.
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