As the Bank of England prepares to announce its latest interest rate decision, the UK mortgage market is seeing a surge in deals under 4%, offering hope for prospective homebuyers. Amid rising competition between lenders, the mortgage landscape appears to be shifting, benefitting those looking to climb the property ladder.
Mortgage Rate Overview
The current average mortgage rate for a two-year fixed deal sits at 5.74%, while five-year fixed deals average 5.24%, according to data from Uswitch.
The Bank of England’s Monetary Policy Committee (MPC) recently cut interest rates to 5%, the first such reduction in four years. While rates are expected to remain steady in Thursday’s announcement, inflation also held steady at 2.2% in August, providing some relief for mortgage holders.
Alice Haine, personal finance expert at Bestinvest, highlighted the positive impact:
“For homeowners and first-time buyers, stable inflation and more competitive mortgage rates mean improved affordability, allowing buyers to stretch their budgets further.”
Rate Predictions for 2024
Looking ahead, experts predict mortgage rates could fall as low as 3.5% by the end of the year, driven by expected further interest rate cuts. Markets are currently anticipating at least two more rate reductions before 2025.
New Deals Under 4%
This week, Santander launched a two-year fixed-rate mortgage at 3.99%, the only current offer below 4%. Sarah Coles, head of personal finance at Hargreaves Lansdown, explained:
“Fixed-rate deals are dropping as the anticipated cuts later this year are already being priced into the market. This has contributed to rising mortgage approvals and more buyers returning to the market.”
HSBC Mortgage Rates
HSBC is offering competitive mortgage rates, including a 3.82% five-year fixed deal, down from last week’s 3.84%. For Premier Standard account holders, the rate is even lower at 3.79%. The lowest two-year fixed rate is 4.14% with a £999 fee, also a slight reduction from the previous 4.19%. Both options assume a 60% loan-to-value (LTV) mortgage, requiring a 40% deposit. For those with a smaller deposit, HSBC also offers 95% LTV deals, though rates are higher, starting at 5.75% for a two-year fix and 5.19% for a five-year fix.
Nick Mendes, from mortgage broker John Charcol, noted:
“HSBC’s blend of competitive rates and manageable fees makes its offer particularly appealing.”
NatWest Mortgage Rates
NatWest is providing a five-year fixed deal at 3.77%, although it recently removed its 3.71% market-leading offer. A two-year fixed rate is available at 4.05%, unchanged from the previous week, with both options requiring a 40% deposit.
Santander Mortgage Rates
Santander continues to offer competitive rates, including a five-year fixed deal at 3.80% with a £999 fee, down from 4.02% last week. For a two-year deal, the rate has dropped to 3.99%, making it the only under-4% deal currently available for a two-year fixed term.
Barclays Mortgage Rates
At Barclays, rates have remained steady, with a five-year fixed deal at 3.84% for buyers with a 40% deposit. The lowest two-year fixed rate stands at 4.22%, unchanged from last week.
Nationwide Mortgage Rates
Nationwide is offering a five-year fixed deal at 3.99% with a £999 fee, requiring a 40% deposit, down from 4.04% last week. Its two-year fixed rate is available at 4.29%, also with a £999 fee for borrowers meeting the 40% deposit requirement.
Halifax Mortgage Rates
As the UK’s largest mortgage lender, Halifax has kept its two-year fixed rate at 4.12% with a £999 fee for first-time buyers. Its five-year fixed rate is 3.81%, unchanged from last week. Halifax also offers a 10-year fixed deal at 4.93%.
Cheapest Mortgage Deals on the Market
NatWest currently holds the title for the cheapest mortgage deal on the market, with its 3.77% five-year fixed rate, although it requires a substantial 40% deposit. Santander follows closely with a 3.80% five-year fixed deal.
For prospective buyers, the 40% deposit requirement on these deals may pose a challenge. With the average UK house price at £292,505, buyers would need to save around £117,000 to meet the deposit threshold.
New Options for First-Time Buyers
In a bid to make homeownership more accessible, Yorkshire Building Society has introduced a new mortgage product for first-time buyers. This deal allows individuals to purchase properties valued up to £500,000 with a deposit as low as £5,000 — equivalent to a 1% deposit.
Additionally, April Mortgages now offers buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, with deposits starting at just 5%. Interest rates for these loans start at 5.20%, with a £195 application fee. Skipton Building Society is also helping first-time buyers by offering mortgages that allow borrowers to borrow up to five-and-a-half times their income.
Future Outlook for Mortgage Rates in 2024
The recent hikes in the UK’s base rate have forced mortgage holders and borrowers to endure record-high repayments. However, as inflation eases and rate cuts loom on the horizon, many expect mortgage rates to drop further.
Matt Smith, a mortgage expert from Rightmove, emphasized:
“While drastic rate cuts aren’t expected, the downward trend in rates should continue, particularly once further reductions in the base rate come into effect.”
Despite this, Smith also noted that mortgage rates are expected to settle at higher levels than in the past, with the base rate likely stabilizing around 3.25%.
Conclusion
The mortgage landscape is beginning to show signs of improvement, with deals under 4% offering a glimmer of hope for buyers. However, with high deposit requirements and the ongoing uncertainty surrounding interest rates, navigating the housing market remains a challenge for many. As further rate cuts are anticipated, prospective buyers and homeowners alike will be watching closely to see how the market evolves in the coming months.
