Several leading lenders have taken different approaches this week, with HSBC introducing the lowest five-year fixed mortgage currently available, while some competitors have opted to raise their rates. The unexpected rise in inflation has dampened expectations for further Bank of England rate cuts this year.
Data from Uswitch shows that the average two-year fixed mortgage rate edged up slightly to 4.74% from 4.7% the previous week, while the average five-year fixed rate remained steady at 4.94%.
The Bank of England recently lowered the base rate to 4%, a move that should ease monthly payments for many homeowners. However, inflation remains a concern, with the consumer price index (CPI) climbing to 3.8% in the year to July—well above the Bank’s 2% target.
According to Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the latest inflation figure is likely to unsettle both existing homeowners and first-time buyers. Higher inflation affects affordability and borrowing capacity, which in turn makes securing a mortgage or moving up the property ladder more difficult.
Haine also noted that persistent inflationary pressures may slow down the pace of future rate cuts. She explained that while affordability has improved in recent months thanks to falling mortgage rates and more relaxed lender stress tests, rates are not falling as quickly as many had hoped.
This week alone, HSBC and Nationwide both announced reductions to their mortgage rates, while NatWest and Halifax moved in the opposite direction, raising theirs.
HSBC mortgage deals
HSBC has reduced its five-year fixed mortgage rate to 3.90%, down from 3.94% last week. Customers holding a Premier Standard account with the bank can secure an even lower rate of 3.87%.
For borrowers considering a two-year fix, the rate remains unchanged at 3.78%, which comes with a £999 fee. Both these options are based on a 60% loan-to-value (LTV), meaning applicants must have a deposit of at least 40%.
For those with smaller deposits, HSBC also provides 95% LTV mortgages, requiring just 5% upfront. However, these come with steeper costs—currently set at 4.94% for a two-year fix and 4.79% for a five-year fix.
The difference in pricing highlights how much deposit size affects the deals available. A larger deposit lowers the LTV ratio, making buyers less risky in the eyes of lenders and enabling them to secure more competitive rates.
NatWest mortgage deals
NatWest (NWG.L) has raised its rates this week, with a five-year fixed deal now priced at 3.94% and carrying a £1,495 fee, compared with 3.85% last week.
For those considering a two-year fix, the cheapest option has also climbed, now at 3.88% versus 3.73% previously. Both offers require at least a 40% deposit.
Santander mortgage deals
Santander (BNC.L) continues to hold steady, keeping its five-year fixed rate for first-time buyers at 4.09% with a £999 fee, unchanged from last week. This assumes a 40% deposit.
Its two-year fixed product also remains the same, at 3.94% with a £999 fee.
Barclays mortgage deals
Barclays (BARC.L) has kept its rates unchanged, with a five-year fixed mortgage at 3.95% and a £899 product fee. Its two-year fixed deal is currently at 3.75%, also with a £899 fee.
Alongside these products, Barclays recently introduced its Mortgage Boost scheme, designed to help customers access higher borrowing amounts when purchasing a property.
The scheme allows family or friends to be added to a mortgage application without directly contributing money or increasing the deposit. For instance, a buyer with a £37,500 annual salary and a £30,000 deposit could typically borrow up to £168,375, enough to purchase a property worth around £198,375.
If a parent or another applicant with the same income joins the application, borrowing potential could rise to £270,000—boosting affordability to a £300,000 property.
Nationwide mortgage deals
Nationwide (NBS.L) has slightly reduced its rates, with a five-year fix for first-time buyers at 4.14% (down from 4.19%) and a two-year fix at 3.86% (down from 3.91%). Both require a 40% deposit and a £1,499 fee.
Customers on Nationwide’s Standard Mortgage Rate (SMR) will benefit from a 0.25% cut, reducing the rate to 6.74% from 1 September 2025. Tracker mortgage holders will also see their payments fall in line with the Bank of England’s rate cut.
Carlo Pileggi, senior manager of mortgages at Nationwide, explained that these reductions push more of their deals below 4%, strengthening support for first-time buyers, movers, and remortgagers.
Nationwide is also widening access by lowering income requirements—first-time buyers can now apply with a £30,000 salary (previously £35,000), or a £50,000 joint income (down from £55,000). This change is expected to help an additional 10,000 buyers annually.
The lender has also asked the Prudential Regulation Authority to increase its capacity for higher loan-to-income lending. Much of this is delivered through its Helping Hand initiative, which allows eligible buyers to borrow up to six times their income, offering around 33% more than standard lending. Since its launch in 2021, Helping Hand has supported around 60,000 first-time buyers.
Additionally, Nationwide has adjusted its affordability checks, cutting stress test rates by between 0.75 and 1.25 percentage points. This could allow borrowers to access, on average, £28,000 more, with some remortgagers able to borrow up to £42,600 extra.
Halifax mortgage deals
Halifax, the UK’s largest mortgage lender, has kept its five-year fixed deal at 3.99% for 60% LTV customers, unchanged from the previous week.
Its two-year fix for first-time buyers has risen to 4.09%, up from 3.83%, with a £999 fee attached. Halifax also offers a 10-year product at 4.87%.
The lender has recently enhanced its five-year fixed range, increasing borrowing limits so customers can access up to £38,000 more, improving affordability for those seeking larger mortgages.
Cheapest mortgage deal on the market
HSBC has overtaken NatWest to offer the cheapest five-year fixed mortgage deal among the big lenders, with a rate of 3.90%. For borrowers looking at shorter terms, Barclays currently leads with a two-year fix priced at 3.75%. Both of these offers, however, come with a requirement for a substantial 40% deposit.
To put this into context, Halifax’s latest figures show the average UK house price in July was £298,237. That means buyers would need nearly £120,000 upfront to access these leading rates, a significant hurdle for many households.
In recent years, more homeowners have been choosing longer repayment periods of 35 years or more. This trend has been especially noticeable among older borrowers, with many now stretching repayments well into their 70s.
One of the newer lenders, April Mortgages, has entered the market with an option to borrow up to seven times income, on fixed terms ranging from five to 15 years. These loans are open to both individual buyers and joint applications.
Backed by Dutch asset manager DMFCO, April Mortgages is offering rates starting at 5.05%, with an application fee of £195. The higher borrowing multiples are designed to improve affordability for those struggling with rising property costs.
Skipton Building Society has also moved to support first-time buyers, now offering loans of up to 5.5 times annual income. This step is intended to help more people onto the housing ladder at a time when affordability remains a major challenge.
Similarly, Leeds Building Society has launched a new mortgage range, increasing the maximum amount first-time buyers can borrow relative to their earnings. Households with at least £30,000 annual income may now also qualify for up to 5.5 times earnings, a change aimed at easing access to homeownership.
Despite these initiatives, many borrowers remain under pressure from elevated mortgage repayments. Banks and building societies have been quick to pass on the impact of the Bank of England’s higher base rate, leaving households with some of the highest costs in recent memory.
UK Finance estimates that around 1.3 million fixed-rate mortgage deals will end in 2025. This wave of expiries could see many homeowners forced to remortgage in a market still burdened with higher rates.
Looking ahead, borrowers are hopeful that the Bank of England will move to cut rates more decisively in the coming months. Any reduction would offer much-needed relief for those facing sharp increases in monthly payments.
Savers, however, may take a different view. With higher interest rates boosting returns on savings accounts, they are more likely to support keeping rates at current levels for longer.
This divide highlights the ongoing tension between homeowners and savers, as policymakers at the Bank of England try to balance both sides of the equation.
Ultimately, while some lenders are finding ways to make borrowing more accessible, the high cost of deposits and the impact of interest rates remain significant barriers to homeownership.
With house prices still elevated and affordability stretched, many buyers may need to rely on extended mortgage terms or higher borrowing multiples just to secure a property.
The coming year could prove critical, as any shift in the Bank of England’s rate policy will play a decisive role in shaping the housing and mortgage markets throughout 2025 and beyond.
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