Best mortgage deals of the week as UK interest rates are held

Mortgage rates come barely moved this week but prospective homeowners are still struggling as more mortgage providers have increased their rates on new fixed deals as the Bank of England kept interest rates unchanged at 5.25%.

The average rate on a two-year fixed deal this week stood at 5.69%, compared with 5.73% the previous week, while for a five-year deal, rates came in at 5.24% same as before, according to figures from Uswitch.

The market appears to be volatile, as higher costs faced by providers to fund mortgage lending pushed many to raise rates again in recent days.

This follows the Bank of England’s (BoE) decision to leave UK interest rates on hold at their current 16-year high of 5.25% for a fifth consecutive time.

Uswitch mortgage expert Kellie Steed said: “This will be unwanted news for the many homeowners with fixed-rate deals ending soon, many of whom are currently on rates of 3% or below, according to the Financial Conduct Authority.

“Perhaps then, it’s a sign of the times that lenders are beginning to broaden their affordability criteria to help borrowers meet higher interest rate demands. For example, Santander has this week added Universal Credit as an acceptable secondary income source. We’ve also seen lenders, such as Halifax, extend their maximum age limits on mortgage applications.

“Some economists expect the first BoE base rate cut to come in May of this year. However, with rates being pulled increasingly quickly again, it’s a difficult decision whether to remortgage now or wait out to see if this rings true in May. The average standard variable rate is still above 8.5%, so if your deal’s end date is imminent, it’s best to speak to a broker as soon as possible.”

HSBC mortgage rates

Borrowers have said goodbye to HSBC’s (HSBA.L) 3.99% for a five-year deal. The cheapest deal on at the lender’s table is now 4.24% for 5 years. There is a 4.21% deal but it is exclusively for premier clients.

Looking at the two-year options, the lowest rate comes in at 4.68% and a £999 fee. These deals are unchanged from the previous week.

Both cases assume a 60% loan to value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit.

Read more: Bank of England leaves interest rates unchanged at 5.25%

The lender offers 95% LTV deals, meaning that you only need to save for a 5% deposit. However, the rates are much higher, with a two-year fix coming in at 5.90% or 5.34% for a five-year fix.

This is because the rate someone can get will be determined by their financial situation and the size of their deposit. The larger the deposit, the lower the loan-to-value (LTV), allowing buyers to access better deals because lenders consider them to be less risky.

NatWest mortgage rates

NatWest (NWG.L) has increased some of its mortgage rates, with its cheapest 3.94% deal no longer available but no changes this week.

The best rates prospective borrowers can get is an online only deal that offers 4.24% for a five-year deal with a £1,495 fee, assuming a 60% LTV. It offers the same rate for green mortgages – this product is only available for properties with an energy performance certificate (EPC) rating of A or B – but the fee here drops to £995.

For a two-year fix, the cheapest a customer can get is 4.64% online, with a product fee of £1495.

Read more: Is now the time to move from a variable to a fixed mortgage?

NatWest has increasing rates for existing customers looking to switch to a new mortgage with the provider. The increases apply to both homeowners and landlords.

Santander mortgage rates

Santander (BNC.L) has also moved away from its under 4% mortgage offer as it increased rates on a raft of deals. However, this week has seen no change.

For a £300,000 mortgage with a 40% deposit (£120,000) prospective homeowners can get 4.29% on a five-year fix.

The same offer under a two-year deal will secure a 4.69% rate, higher than the previous 4.53%. In both cases, which assumes a 25-year repayment period, there is a £999 product fee.

Skipton mortgage rates

For the same scenario as above, a £300,000 mortgage with a 40% deposit (£120,000) prospective homeowners can get a 5.04% two-year fixed rate with product fees coming in at £1,495 at Skipton BS. Last week this deal came in at 4.89%.

For the longer five-year fix, the lowest rate comes in at 4.69% with no fees. Still higher than the previous 4.48%.

Read more: How hard is it to get on the property ladder?

Skipton also offers a 100% mortgage for first-time buyers, (or renters who haven’t owned a property in the past three years) and who can demonstrate a 12-month track record of making monthly rental payments. Unlike other 100% mortgage deals, it does not require a guarantor.

Barclays mortgage rates

Barclays (BARC.L) has a five-year deal for prospective homebuyers with a 40% deposit (60% LTV) that comes in at 4.29%, unchanged from last week. The fee is set at £899. The bank has a 4.28% rate for the same deal but that is reserved for Premier Exclusive clients.

When it comes to two-year mortgage deals, the lower you can get is 4.54%, same as before.

Nationwide mortgage rates

At Nationwide (NBS.L), five-year purchase fixed rates will start from 4.34% with a £999 fee for borrowers with at least 40% cash deposit.

Equivalent two-year rates start from 4.69%. No changes from the previous week’s hike.

Halifax mortgage rates

Halifax, owned by Lloyds (LLOY.L),offers a two-year fixed rate of 4.68% when before was 4.60% with a £999 fee for first-time buyers borrowing the same £180,000 we have used as a scenario above.

For the five-year fix, the lender scrapped its 4.28% rate for a the latest 4.48% deal that would put monthly payments at £968.

It also offers a 10-year deal with a mortgage rate of 4.93%.

Cheapest mortgage deal on the market

As under 4% mortgage rates are off the market it makes it harder for prospective homeowners to say they’ve secured a good deal.

The 4.24% deals from HSBC and NatWest appear to be some of the cheapest rates available but you will need a hefty amount of cash to be put up front in order to secure the deal.

Given that the UK house price average currently sits at £263,600, a 40% deposit equates to over £105,000.

Borrowers would need to spread their home loans over more than 70 years to be able to afford the same mortgages on offer just two years ago, banks have said.

Will mortgage rates go down in 2024?

Mortgage rates have risen substantially as the Bank of England increased the interest rates to a 16-year high in a bid to tackle inflation.

However, the consensus is that interest rates have peaked and that 2024 will see the Bank will begin to cut rates as inflation eases.

Bank of England governor Andrew Bailey said: "In recent weeks we’ve seen further encouraging signs that inflation is coming down.

"We’ve held rates again today at 5.25% because we need to be sure that inflation will fall back to our 2% target and stay there.We’re not yet at the point where we can cut interest rates, but things are moving in the right direction."

Read more: What is the First Homes scheme and who is eligible?

The BoE's interest rate is currently set at 5.25%. Markets are expecting interest rates to fall to 5% by May, 4.75% in June, 4.5% in August and 4% in November.

If the BoE cuts interest rates as expected, mortgage rates will continue to come down throughout 2024.

About 1.6 million existing borrowers have relatively cheap fixed-rate deals expiring this year.

Matt Smith, Rightmove’s mortgage expert said: "Although today isn't the day for the first Base rate cut, each day that passes is one step closer, and it's very much a 'when' rather than 'if' we see the first drop from 5.25%.

"Mortgage rates have risen slightly over the last 6 weeks but it does feel like the pressure on lenders to increase rates has dissipated, with some lenders having already cut rates in response to yesterday's positive inflation news. This may mean that average mortgage rates start to fall back in the next couple of weeks. If this is the case it will be first time average rates will have reduced in over a month.

Watch: Bank of England keeps interest rate at 5.25% but cut moves closer

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