HSBC (HSBA.L) raised some of its mortgage rates this week, while other major lenders held their deals, as the market approaches winter with caution.
The average rate for a two-year fixed mortgage dropped to 4.74% this week, according to data from Uswitch. Meanwhile, the average five-year fixed deal rose from 4.99% to 5.04%. Those are the average rates on a 75% loan-to-value (LTV) mortgage, meaning buyers need to have at least 25% for a deposit.
The mixture of moves on mortgage deals follows the Bank of England‘s (BoE) decision to keep interest rates on hold at 4% in September. Analysts suggest imminent, further base rate cuts by the Bank of England appear unlikely, and uncertainty always foreshadows a budget.
Inflation data, released ahead of the BoE’s latest rate decision, showed that the UK’s Consumer Prices Index (CPI) grew by 3.8% in the year to August, unchanged from July. This stickiness in inflation has dampened expectations that the BoE will announce more rate cuts this year.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers may well be disappointed to see fixed mortgage rates on the rise. Volatile swap rates and a cautionary approach among lenders have led to an abrupt halt in consecutive monthly average rate falls.
“The shift in sentiment towards pre-pricing and product churn during September led to a rise in the average shelf-life of a mortgage, to 22 days, the first jump above 20 days for six months.
“This increase is likely a result of a calming mortgage market, so it will be interesting to see if activity picks up should lenders need to hit any year-end targets.”
Swap rates reflect the market’s view of which direction the BoE’s interest rates will go, so lenders use them to set their own rates.
Data from Moneyfacts also showed that product choice has fallen month-on-month, to 6,998 options, but average shelf life has at least increased to 22 days.
“Lenders have responded cautiously, with some edging rates higher and the overall average ticking up slightly,” said Simon Gammon, managing partner at mortgage advisers Knight Frank Finance.
“This is unlikely to mark the start of a sustained rise in borrowing costs, but rather a prolonged plateau while the outlook becomes clearer.”
With that in mind, here’s more detail on major lenders’ mortgage rates this week:
HSBC mortgage deals
HSBC (HSBA.L) has a 4.06% for a five-year deal, with a £999 fee, which is higher than the previous week’s 3.99%. For those with a Premier Standard account with the lender, this rate is 4.03%.
Looking at the two-year options, the fixed standard rate also increased to 3.90% from 3.84%, with a £999 fee remaining unchanged.
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 significantly higher, with a two-year fix at 4.96% or a five-year fix at 4.89%.
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 remains at 3.94%, unchanged from last week. In both cases, you’ll need a deposit of at least 40% 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 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 £67,375, enabling them to purchase a home priced at around £ 107,875.
However, with Mortgage Boost, the total borrowing potential can increase if a second person, such as a parent, is added to 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 at 4.22%, unchanged from last week. First-time buyers are looking at 3.99% for a two-year fix, which remains unchanged. Both deals require a 40% deposit and come with a £999 upfront fee.
The lender has warned that on 19 September, it will be making rate changes across its product ranges.
Eligible first-time buyers can apply for a mortgage with a minimum salary of £30,000 and joint applicants with a combined salary of £ 50,000. This is expected to support an additional 10,000 first-time buyers each year.
The vast majority of Nationwide’s high loan-to-income (LTI) lending is conducted through its Helping Hand, which enables eligible first-time buyers to borrow up to six times their annual income. This enables borrowing of up to 33% more than the standard lending amount. Since its launch in 2021, Helping Hand has supported approximately 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 may be able to borrow up to £42,600 more.
Halifax mortgage deals
Halifax, the UK’s largest mortgage lender, offers a five-year rate of 4.09% (also 60% LTV), which is higher than the previous rate of 3.97%.
The lender, owned by Lloyds (LLOY.L), offers a two-year fixed-rate deal at 3.87%, with a £999 fee for first-time buyers, which is higher than the previous 3.82%.
It also offers a 10-year deal with a mortgage rate of 4.87%.
Santander mortgage deals
Santander (BNC.L) withdrew its 60% LTV mortgage products for first-time buyers on borrowing of less than £250,000 on two- and five-year terms on 19 September.
A spokesperson for the bank said that the “change was part of a reprice following the changes to swaps after the Bank of England held interest rates”. Santander continues to offer products with LTVs of 85% and above for first-time buyers, with the cheapest two-year fix coming in at 4.31% or 4.45% for a five-year deal.
Cheapest mortgage deal on the market
NatWest (NWG.L) offers the cheapest five-year fixed rate among the major lenders, at 4.02%. When it comes to the shorter two-year fix, Halifax offers the lowest rate, at 3.87%. However, both require a hefty 40% deposit.
A growing number of homeowners in the UK are opting for mortgage terms of 35 years or longer, 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, helping 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.
