Major lenders are starting to increase mortgage rates ahead of a Bank of England (BoE) interest rate decision. Markets believe rates will remain unchanged at 4% because of sticky inflation.
The average rate for a two-year fixed mortgage rose to 4.75% this week, from 4.71% last week, while the average five-year fixed deal rose from 4.94% to 4.95%, according to data from Uswitch.
This week, HSBC (HSBA.L), Barclays (BARC.L), Nationwide (NBS.L), and Halifax increased their mortgage rates, while NatWest (NWG.L) and Santander (BNC.L) left them unchanged — no major lender cut rates.
The BoE cut interest rates to 4% in August, but is widely expected to keep them unchanged next week. The primary inflation measure, the consumer price index (CPI), rose to 3.8% in the 12 months to July, well above the BoE’s 2% target, and figures next week are expected to show yet another increase that will force the BoE to hold rates higher for longer.
Meanwhile, the number of low-deposit mortgages on the UK market has reached its highest level in 17 years, according to new data from financial information site Moneyfacts. In September, there were 1,360 mortgage products available requiring deposits of just 5% or 10%, marking the largest selection since March 2008 when 1,532 products were on offer.
These low-deposit options now account for nearly a fifth (19%) of the overall homeowner mortgage market, Moneyfacts found. Such deals are typically sought by first-time buyers looking to step onto the property ladder but who struggle to save for larger deposits.
Moneyfacts’ research examined the mortgage market on the first day of each month. It also revealed that the “shelf life” of mortgages, how long products remain available before being withdrawn or changed, has shortened, dropping to 17 days in September from 21 days a year earlier.
Also, in what could be a market first, Newcastle Building Society announced it will loan up to £350,000 for first-time buyers this week, with deposits as low as £5,000. However, the lender stipulates that buyers must fully fund their own deposit.
It said the five-year mortgage, which has a fixed rate of 5.25% over a loan term of up to 35 years, was designed to ensure homebuyers without parental help could get on the housing ladder as house prices rise further out of reach.
HSBC mortgage deals
HSBC (HSBA.L) has a 4.04% rate for a five-year deal, higher than last week’s 3.9%. For those with a Premier Standard account with the lender, this rate is 4.01%.
Looking at the two-year options, the fixed standard rate is 3.89% with a £999 fee, also higher than the previous 3.78%.
Both cases assume a 60% loan-to-value (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 5.05% or 4.89% 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 3.94% with a £1,495 fee, which is the same as before.
The cheapest two-year fixed deal is 3.88%, which is also unchanged the previous week. 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 is 4.09% for first-time buyers, unchanged from the previous week. It has a £999 fee, assuming a 40% deposit.
For a two-year deal, customers can secure a 3.94% offer, with the same £999 fee, again, unchanged from before.
The lender, however, did increase some of its deals for first-time buyers at the end of August. Increases include: all 75%-90% LTV two-year fixed rates increased by up to 0.10%; all 75%-90% LTV five-year fixed rates increased by up to 0.11%; all 60%-75% LTV 10-year fixed rates increased by 0.07%.
Barclays mortgage deals
Barclays (BARC.L) has moved to increase its mortgage rates yet again, with a five-year fix this week coming in at 4.11%, with a £899 product fee, which is higher than the previous 4.05% from the previous deal. A two-year fix comes in at 3.92% this week, with a £899 product fee, which is also higher than the previous 3.85%.
Barclays has 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 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 at a five-year fix is 4.22%, higher than the previous 4.14%. First-time buyers are looking at 4.03% for a two-year fix, which is also above last week’s 3.86%. Both deals require a 40% deposit and come with a £1,499 upfront fee.
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.
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 their income. This enables borrowing of up to 33% more than standard lending. Since launching in 2021, Helping Hand has supported around 60,000 first-time buyers.
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.
Halifax mortgage deals
Halifax, the UK’s biggest mortgage lender, offers a five-year rate of 3.99% (also 60% LTV), unchanged from last week.
The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate deal at 3.83%, with a £999 fee for first-time buyers, a drop from the previous 4.09%.
It also offers a 10-year deal with a mortgage rate of 4.87%.
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.
Cheapest mortgage deal on the market
NatWest has taken the crown from HSBC for the cheapest five-year fix among the big lenders, at 3.94%. When it comes to the shorter two-year fix, Halifax comes in with the lowest offer, at 3.85%. However, both require a hefty 40% deposit.
According to the latest Nationwide figures, the average UK house price was £271,079 in August, so a 40% deposit equals over £108,000.
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 seven times their income on loans fixed for five to 15 years. 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 5.05% 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 £30,000 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 higher 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.
