Three major UK mortgage lenders have announced rate cuts, bringing more fixed-rate deals below 5% within reach of some borrowers. The reductions come just days before the Bank of England is expected to increase its base rate from 3.75% to 4%.
Barclays has lowered some mortgage rates by up to 0.3 percentage points, with its cheapest deals now starting at 4.89%. Nationwide is also reducing rates by up to 0.15 percentage points, bringing its lowest rate to 4.89%. Its sister bank, Virgin Money, is cutting rates by as much as 0.17 percentage points.
Halifax has reduced selected rates by up to 0.22 percentage points, with deals now available from 4.93%.
However, the lowest rates are generally reserved for borrowers with larger deposits or substantial equity in their homes. Some offers also come with additional eligibility requirements.
Mortgage rates have edged down slightly across the market following a recent increase linked to renewed conflict involving Iran. The situation has raised concerns that higher energy prices could push up household bills and food costs, adding to inflationary pressure.
According to Moneyfacts, the average two-year fixed mortgage rate currently stands at 5.97%, while the average five-year deal is 5.99%. Five-year rates had moved above 6% earlier this month.
Mortgage cuts despite expected base rate rise
The latest reductions may appear surprising given that the Bank of England is widely expected to raise interest rates this Thursday to help control inflation.
Usually, mortgage rates move in the same direction as the Bank Rate. However, lenders have already factored much of the expected increase into their mortgage pricing.
Banks are also facing greater pressure to attract customers as higher borrowing costs continue to weigh on the housing market. With fewer people willing or able to move home, lenders are competing more actively by offering lower rates.
Nationwide recently reported that UK house price growth had slowed to its weakest level since early 2024.
Stephen Perkins, mortgage broker and managing director of Norwich-based Yellow Brick Mortgages, said Barclays’ decision to reduce rates was positive news for borrowers and could encourage other lenders to offer more competitive deals.
He also warned that mortgage rates do not automatically rise or fall in line with the Bank of England’s base rate.
What mortgage deals are available?
Some of the most competitive offers are currently available to buyers with a 40% deposit.
Barclays is offering a two-year fixed rate of 4.95% with an £899 product fee for eligible buyers. Halifax has a similar deal at 4.93%, although applicants must pay a £999 fee, belong to its Loyalty Club and have a property with an Energy Performance Certificate rating of A or B. The Halifax offer also includes £250 cashback.
For homeowners looking to remortgage, Nationwide has reduced one of its rates from 5.09% to 4.99%, with a £999 fee.
Carlo Pileggi, Nationwide’s head of mortgage products, said current market conditions had allowed the building society to reduce rates across its mortgage range.
First-time buyers can also benefit from some of the changes. Nationwide has cut its two-year fixed deal for buyers with a 15% deposit from 5.58% to 5.48%. The product comes with no arrangement fee.
Nicholas Mendes, mortgage technical manager at John Charcol, said the return of fixed-rate deals below 5% was an encouraging development for borrowers. However, he pointed out that most of these offers require a deposit or existing equity of at least 40%.
Buyers with smaller deposits and first-time purchasers may still face rates above 5%. Mendes also advised borrowers to consider the overall cost of a mortgage rather than focusing solely on the advertised interest rate, as some of the cheapest products come with fees of up to £1,499.
Five-year fixed mortgage rates
There are also several competitive options for borrowers considering a five-year fixed deal.
Nationwide now offers a rate of 4.89% to eligible new and existing customers moving home with a 40% deposit. However, the deal carries a £1,499 fee and has been reduced from 5.01%.
Barclays has also introduced a five-year rate of 4.89% for buyers with a 40% deposit, although this is limited to its Green Home mortgage for qualifying energy-efficient new-build properties. Buyers purchasing standard homes can access a five-year fixed rate of 4.99%, with an £899 fee.
Other lenders have also reduced selected deals. Santander offers a five-year rate of 4.91%, with a £1,499 fee and £250 cashback for borrowers with a 40% deposit. Halifax has a 4.93% deal for eligible Loyalty Club members, with a £999 fee.
HSBC is offering a rate of 4.93%, although this is restricted to Premier account holders.
Despite the recent cuts, mainstream lenders are not currently offering five-year or other fixed-rate deals below 5% to borrowers with deposits of 25% or less.
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