Lenders have mostly decided to keep rates unchanged as the Bank of England (BoE) cut interest rates. Still, first-time buyers can get a deal as low as 3.77%, depending on the size of their deposit, with Natwest (NWG.L) keeping its two-year fixed deal.
The average rate for a two-year fixed mortgage stands at 4.70% this week, while five-year fixed deals average 4.97%, according to data from Uswitch.
The Bank of England has cut interest rates to 4%, which should provide some relief to homeowners who could see mortgage payments go down. The primary inflation measure, the Consumer Price Index (CPI), stood at 3.6% in the 12 months to June, well above the BoE’s 2% target.
Chancellor Rachel Reeves announced plans under which renters who have a good track record of monthly payments will be able to use this to prove to lenders how much they can afford to borrow, sometimes without the need for a deposit.
Homeowners are set to benefit from simplified mortgage rules, as the Financial Conduct Authority (FCA) confirms changes designed to make remortgaging or reducing loan terms easier.
The BoE also loosened its lending rules. Until now, just under 10% of new mortgages issued were for valuations exceeding 4.5 times a borrower’s income. That is set to rise to 15% across the industry, with some building societies and banks able to offer an even higher number of new mortgages at that level.
BoE estimates suggest 36,000 extra mortgages with higher loan-to-income ratios could be handed out each year as a result of the change.
According to the latest figures from Rightmove (RMV.L), the average two-year fixed rate at 80% loan-to-value (LTV) has come down from 5.21% to 4.38% over the last year.
Over the same period, the average five-year fixed rate at 80% LTV has fallen from 4.91% to 4.52%.
The most expensive cities for the first-time buyers were London, St Albans and Cambridge, which have average asking prices of £497,295, £387,882 and £361,709 respectively.
Matt Smith, Rightmove’s mortgage expert said: “As expected we now have the third Bank Rate cut of the year, with the Bank continuing along its forecast trajectory. Mortgage lenders have had a bit of room to reduce rates over the last week, owing to the ongoing developments around global tariffs.
“However, we expect that lenders will use the headline of today’s cut as the catalyst to reduce their rates a little further, though lender competition remains fierce and we don’t expect major rate drops.
“Lenders have been competing for business in a market which has the largest supply of homes for sale in a decade. A combination of rate cuts and changes to buyer affordability criteria are helping many home-movers to responsibly borrow more towards the home that they want.
“The market expects there will be one more Bank Rate cut before the end of the year, with an outside chance of two. Any further cuts would likely see this cycle repeat again – with lenders using it as an opportunity to reduce rates a little more. It bodes well for the second half of this year, with further mortgage rate reductions and stable prices likely to encourage more activity.”
Nationwide (NBS.L), Britain’s biggest building society, has also cut the salary requirements for first-time buyers from £35,000 to £30,000, in a move it hopes will enable 10,000 more people to become homeowners.
Amanda Bryden, head of mortgages at Halifax, said: “Challenges remain for those looking to move up or onto the property ladder. But with mortgage rates continuing to ease and wages still rising, the picture on affordability is gradually improving.
“Combined with the more flexible affordability assessments now in place, the result is a housing market that continues to show resilience, with activity levels holding up well.
“We expect house prices to follow a steady path of modest gains through the rest of the year.”
This week, only HSBC (HSBA.L) cut its mortgage rates, with all other major lenders keeping deals untouched as most had already adjusted to what was a widely expected decision by the BoE to cut interest rates.
HSBC mortgage deals
HSBC (HSBA.L) has a 3.94% rate for a five-year deal, unchanged from last week. For those with a Premier Standard account with the lender, this rate is 3.91%.
Looking at the two-year options, the lowest rate is 3.78% with a £999 fee, a cut from the previous 3.82%.
Both cases assume a 60% LTV mortgage, meaning buyers need to have at least 40% for a deposit.
HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. However, the rates are much higher, with a two-year fix at 4.94% or 4.79% for a five-year fix.
This is because their financial situation and deposit size determine the rate someone can get. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky.
NatWest mortgage deals
NatWest’s (NWG.L) five-year deal is 3.88% with a £1,495 fee, unchanged from the previous week.
The cheapest two-year fixed deal is 3.77%, again the same as before. In both cases, you’ll need at least a 40% deposit to qualify for the rates.
Santander mortgage deals
At Santander (BNC.L), a five-year fix comes in at 4.01% for first-time buyers, which is unchanged from the previous week. It has a £999 fee, assuming a 40% deposit.
For a two-year deal, customers can secure a 3.84% offer, with the same £999 fee, again the same as before.
However, the lender increased rates on some 85%-95% LTV five-year fixed rates by up to 0.12%
Barclays mortgage deals
Barclays (BARC.L) five-year fix this week stands at 3.99%, same as before. The lowest for two-year mortgage deals used to be 3.76% or 3.75% if you had a Premier exclusive account but that offer now comes in at 3.84% (3.83% for Premier clients).
Barclays recently launched a mortgage proposition to help new and existing customers access larger loans when purchasing a home. The initiative, known as Mortgage Boost, enables family members or friends to effectively “boost” the amount that can be borrowed toward a property without needing to lend or gift money directly or provide a larger deposit.
Under the scheme, a borrower’s eligibility for a mortgage can increase significantly by including a family member or friend on the application. For example, an individual with a £37,500 annual income and a £30,000 deposit might traditionally be able to borrow up to £168,375, enabling them to purchase a home priced at around £198,375.
However, with Mortgage Boost, the total borrowing potential can rise substantially if a second person, such as a parent, joins the application. In this case, if the second applicant also earns £37,500 a year, the combined income could push the borrowing limit to £270,000, enabling the buyer to afford a home worth up to £300,000.
Nationwide mortgage deals
Nationwide’s (NBS.L) lowest mortgage rate for first-time buyers is 4.14% for a five-year fix. First-time buyers are looking at 3.94% for a two-year fix, unchanged from before. Both deals require a 40% deposit and come with a £1,499 fee.
However, mortgage customers who are on Nationwide’s Standard Mortgage Rate (SMR) will see a decrease of 0.25%. The new SMR of 6.74% will come into effect on 1 September 2025.
Rates on tracker mortgages held by existing Nationwide customers automatically decrease when Bank Rate is cut, so these will decrease to reflect the Bank Rate change from 1 September 2025.
Carlo Pileggi, Nationwide’s senior manager of mortgages, said: “As the country’s second largest lender, we always strive to support all parts of the market with competitive rates. This latest round of cuts across our range move even more of our rates below 4% and should put Nationwide front of mind of first-time buyers, those moving on to their next home and those looking for a new mortgage deal.”
Eligible first-time buyers can apply for a mortgage with a £30,000 salary, down from £35,000, and joint applicants with a £50,000 combined salary, down from £55,000. This is expected to support an additional 10,000 first-time buyers each year.
Nationwide, which lent to more first-time buyers in 2024 than any other lender, has confirmed it has applied to the Prudential Regulation Authority to increase its high loan-to-income lending capacity.
The vast majority of Nationwide’s high LTI lending is done through its Helping Hand, which allows eligible first-time buyers to borrow up to six times income. This enables borrowing of up to 33% more than standard lending. Helping Hand has helped around 60,000 first-time buyers since launching in 2021.
The lender has also adjusted its mortgage affordability calculation by reducing stress rates by 0.75 and 1.25 percentage points, helping applicants borrow more, whether buying a first home, moving, or remortgaging.
Applicants can borrow, on average, £28,000 more; however, in some remortgage cases, customers could borrow up to £42,600 more.
Nationwide also reduced its standard stress rate and the rate applied to eligible first-time buyers and home movers fixing their deal for at least five years.
Halifax mortgage deals
Halifax, the UK’s biggest mortgage lender, offers a five-year rate of 3.94% (also 60% LTV), same as before.
The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate deal at 3.79%, with a £999 fee for first-time buyers, again unchanged.
It also offers a 10-year deal with a mortgage rate of 4.78%.
Halifax has enhanced its five-year fixed mortgage products by increasing borrowing capacity. This improvement allows borrowers to access up to £38,000 more, enabling them to secure larger mortgages based on individual incomes.
Rachel Springall, finance expert at Moneyfacts, said: “The flourishing choice of low-deposit mortgages will no doubt be welcomed by borrowers looking to remortgage or are a first-time buyer.
“The government has been clear that it wants lenders to do more to boost UK growth, and so a rise in product availability for aspiring homeowners is a healthy step in the right direction.”
Cheapest mortgage deal on the market
NatWest has some of the lowest rates on the market, with a two-year fix coming in at 3.77%. The same lender also takes the crown for a five-year fix with its 3.88% deal. However both require a hefty 40% deposit.
The average UK house price was £298,237 in July, according to the latest figures from Halifax, so a 40% deposit equals about £120,000.
A growing number of homeowners in the UK are opting for 35-year or longer mortgage terms, with a significant rise in older borrowers stretching their repayment periods well into their 70s.
Lender April Mortgages offers buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, from a deposit of 5%. Both those buying alone and those buying with others can apply for the mortgage.
As part of the independent Dutch asset manager DMFCO, the company offers interest rates starting at 5.20% and an application fee of £195.
Skipton Building Society has also said it would allow first-time buyers to borrow up to 5.5 times their income to help more borrowers get on the housing ladder.
Leeds Building Society is increasing the maximum amount that first-time buyers can potentially borrow as a multiple of their earnings with the launch of a new mortgage range. Aspiring homeowners with a minimum household income of £40,000 may now be able to borrow up to 5.5 times their earnings.
Mortgage holders and borrowers have faced record-high repayments in recent years, as the Bank of England’s base rate has been passed on by banks and building societies.
According to UK Finance, 1.3 million fixed-mortgage deals are set to end in 2025. Many homeowners will hope the Bank of England acts quickly to cut rates more aggressively. At the same time, savers will likely root for rates to remain at or near their current levels.
Contact one of our highly experienced mortgage advisors today on 0121 500 6316 to discuss your mortgage needs.
