HSBC (HSBA.L) lowered some of its mortgage rates this week, while other major lenders held their deals, amid fading expectations that the Bank of England (BoE) will cut interest rates again this year.
The average rate for a two-year fixed mortgage fell to 4.75% this week, down from 4.81% last week, according to data from Uswitch. Meanwhile, the average five-year fixed deal came in at 4.99%, compared to 5.03% last week. Those are the average rates on 75% loan-to-value (LTV) mortgage, meaning buyers need to have at least 25% for a deposit.
The mixture of moves on mortgage deals comes after the BoE opted to keep interest rates on hold at 4% in September.
Inflation data, released ahead of the BoE’s latest rate decision, showed that the UK’s consumer prices index (CPI) grew by by 3.8% in the year to August, which was unchanged from July. This stickiness in inflation has dampened expectations that the BoE will announce more rate cuts this year.
Alice Haine, personal finance analyst at online investment platform Bestinvest by Evelyn Partners, said: “While mortgage rates have eased over the past year, following five Bank of England interest rate cuts, the outlook for further reductions remains unclear.”
“Fortunately, more flexible lending criteria, the rise of low-deposit mortgages and longer-term loan options are helping first-time buyers meet affordability tests,” said Haine.
“Existing borrowers emerging from ultra-low fixed deals, on the other hand, face significant jumps in monthly repayments when they remortgage unless they have managed to clear a chunk of their outstanding balance.”
“For those with deals expiring in the next few months, increasing monthly repayments in advance could help to ease the transition to higher mortgage costs,” she said. “In turn that will reduce the capital owed – softening the hit to the household budget.”
Despite dwindling rate cut expectations and concerns about affordability for homebuyers, the average UK house price rose to £271,995 in September. That represented month-on-month growth of 0.5%, Nationwide’s latest house price index showed. This was more than the consensus forecast of a 0.2% monthly increase, according to Capital Economics.
However, on an annual basis, price growth of 2.2% in the year to September was only marginally higher than the 2.1% recorded in August.
Matt Swannell, chief economic advisor to the EY ITEM Club, said: “The housing market looks set to continue experiencing modest growth.”
“On the one hand, the recent strength in pay growth has seen affordability improve slightly, although it remains stretched. On the other hand, the situation for many buyers will be made more difficult by slowing real income growth and mortgage rates that could be set to rise, as financial markets do not expect interest rates to be cut again until next year.”
With that in mind, here’s more detail on major lender’s mortgage rates this week:
HSBC mortgage deals
HSBC (HSBA.L) has a 3.99% for a five-year deal, with a £999 fee, which is down from 4.04% last week. For those with a Premier Standard account with the lender, this rate is 3.96%.
Looking at the two-year options, the fixed standard rate is 3.84% with a £999 fee, also lower than 3.89% last week.
Both cases assume a 60% LTV mortgage, meaning buyers need to have at least 40% for a deposit.
HSBC (HSBA.L) 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 4.96% or 4.87% 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 4.02% with a £1,495 fee, which is unchanged from last week.
The cheapest two-year fixed deal is 3.94%, which is also the same as last week. In both cases, you’ll need at least a 40% deposit to qualify for the rates.
Barclays mortgage deals
Barclays (BARC.L) has left its five-year fix at 4.11%, with a £899 product fee. A two-year fix comes in at 3.92% with a £899 product fee, also untouched from the previous week.
Earlier in the year, Barclays (BARC.L) 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 (NBS.L) offers a five-year fix of 4.27%, which is unchanged from last week. First-time buyers are looking at 4.04% for a two-year fix, which is also untouched from last week. Both deals require a 40% deposit and come with a £999 upfront fee.
Eligible first-time buyers can apply for a mortgage with a £30,000 salary and joint applicants with a £50,000 combined salary. This is expected to support an additional 10,000 first-time buyers each year.
The vast majority of Nationwide’s (NBS.L) 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 also adjusted its mortgage affordability calculation by reducing stress rates in May by between 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 3.97% (also 60% LTV), which is the same as last week.
The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate deal at 3.82%, with a £999 fee for first-time buyers, unchanged from the previous week.
It also offers a 10-year deal with a mortgage rate of 4.78%.
Santander mortgage deals
Santander (BNC.L) recently withdrew its two-year fixed-rate 60% LTV mortgage product for first-time buyers on borrowing of less than £250,000 on 19 September.
A spokesperson for the bank that the “change was part of reprice following the changes to swaps after the Bank of England held interest rates”. However, they added that Santander (BNC.L) continued to offer products with LTVs of 85% and above for first-time buyers.
Cheapest mortgage deal on the market
Halifax continues to offer the cheapest five-year fix among the big lenders, at 3.97%. When it comes to the shorter two-year fix, Halifax also comes in with the lowest offer, at 3.82%. However, both require a hefty 40% deposit.
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.
Meanwhile, Skipton Building Society is allowing first-time buyers to borrow up to 5.5 times their income to help more borrowers get on the housing ladder.
Leeds Building Society recently reduced the minimum household income requirement on its first-time buyer mortgage range. This means single or joint first-time buyer applicants with a 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 this year. Many homeowners will hope the Bank of England continues to cut interest rates. 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.
