Best UK mortgage deals of the week

Mortgage rates have gone up for longer deals compared to last week as future homeowners struggle to find a decent price.

The average rate on a two-year fixed deal this week stood at 5.85%, below the previous 5.89%, while rates for a five-year deal came in at 5.39%, above last week's 5.34%, according to figures from Uswitch.

Anxiety has set in among UK mortgage lenders with rates being hiked left, right and centre, as the Bank of England's (BoE) decided to leave UK interest rates on hold at their current 16-year high of 5.25% for a sixth consecutive time.

Read more: Bank of England keeps interest rates at 16-year high

With just two BoE cuts now expected in 2024, several lenders have raised rates – adding pressure on homebuyers and those looking to remortgage.

Impact on mortgage rates and house prices

Alice Haine, personal finance analyst at Bestinvest, said: “Future rate cuts would certainly deliver respite for some mortgage borrowers, many of whom have been forced to get up to speed on all the options available in the market since the BoE first began its rate-hiking cycle. Extending the length of a home loan is becoming an increasingly popular route for some to get a foot on the property ladder with one in five first-time buyers signing up for a mortgage term of more than 35 years in 2023, up from one in 10 in 2022."

Sarah Coles, Yahoo's personal finance columnist and head of personal finance for Hargreaves Lansdown, said BoE's decision was expected and won't move the property market. She said there were indications that rate cuts may not be as distant as some mortgage holders were fearing.

"The Bank played down inflationary risks, and drew out the growing signs of weaknesses in the economy – both of which point to the likelihood of a cut this summer."

Moneyfacts figures show the average 2-year fixed rate mortgage rose from 5.56% at the end of January to 5.93% today. "We can’t expect seismic shifts, but there’s likely to be some movement in the direction of 5%, as the market adjusts," Coles said.

Read more: Best UK mortgage deals of the week

Meanwhile, consumer group Which? said mortgage holders on a tracker or standard variable rate should see no change to their monthly repayments.

"With mortgage rates remaining stubbornly high, it's crucial that banks are ready to respond to their customers' needs with tailored support. Talking to your lender does not affect your credit rating and support available may include taking a payment holiday or only paying the interest on repayments," said Sam Richardson, deputy editor of Which? Money.

HSBC (HSBA.L) and NatWest (NWG.L) are both hiking the cost of fixed-rate product transfer deals – those available to existing customers looking for a new fixed rate.

Highlighting the impact rates are having mortgage holders, data from Mojo Mortgages showed that in April 2022, the average mortgage rate for a first-time buyer was 2.68%. For a property that costs £250,000 with a 10% deposit and a 30-year loan term, the monthly cost would be £910.

However, the same property (£250,000 with a 10% deposit) would now cost an average of £1,200 per month due to an average mortgage rate of 4.95%.

HSBC mortgage rates

Borrowers have long said goodbye to HSBC’s (HSBA.L) 3.99% for a five-year deal. The cheapest deal at the lender’s table is now 4.48% for five years.

Looking at the two-year options, the lowest rate comes in at 4.83%, with a £999 fee. Same as the previous week.

Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit.

The lender 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 coming in at 5.79% or 5.30% for a five-year fix.

This is because the rate someone can get will be determined by their financial situation and the size of their deposit. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky.

Read more: When will interest rates fall and what should you do?

HSBC is increasing fixed rates for existing residential and buy-to-let borrowers looking for a new deal and those looking to switch to a new fixed rate and increase their borrowing.

HSBC’s two-year fixed-rate product switch deal has risen to 4.78% from 4.63%. Its five-year equivalent deal has gone up to 4.39% from 4.32%.

NatWest mortgage rates

NatWest (NWG.L) has kept some of its mortgage rates, but no offer comes close to its previous 3.94% deal.

The best rates prospective borrowers can now get is an online-only deal that offers 4.40% for a five-year deal with a £1,495 fee, assuming a 60% LTV. It offers the same rate for green mortgages – this product is available for properties with an energy performance certificate (EPC) rating of A or B – but the fee here drops to £995.

For a two-year fix, the cheapest a customer can get is 4.77% online, with a product fee of £1,495.

Read more: Best savings accounts that offer above inflation rates

NatWest is raising the cost of its two and five-year fixed-rate product transfer deals by up to 0.12 percentage points.

The lender’s new two-year rate is at 4.89% with a £995 fee (60% LTV). Five-year deals start from 4.53% with the same fee (60% LTV).

Santander mortgage rates

Santander (BNC.L) has also moved away from its under 4% mortgage with a five-year fix coming in at 4.47%, assuming you have a 40% deposit. Last week this deal was on the table for 4.35%.

A 60% LTV two-year fixed rate with a £999 purchase fee used to be priced at 4.78%, but now sits at 4.88%. A 75% LTV two-year fixed rate, with a £999 purchase fee is priced at 4.97%, higher than last week’s 4.83%.

Barclays mortgage rates

Barclays (BARC.L) used to have the cheapest five-year deal for prospective homebuyers with a 40% deposit (60% LTV) that came in at 4.17%, with a £899 fee. No more – the lender has hiked the rate for that deal to 4.47%. However, it is unchanged from last week.

When it comes to two-year mortgage deals, the lowest you can get is 4.84%, also unchanged from last week.

Read more: Top tips to invest in a property and the features that sell a home

The lender has, however, bucked the trend and cut the cost on some deals. The bank’s two-year fixed rate at 85% LTV is cut from 5.23% to 4.99%, with an £899 fee. The fee-free equivalent deal is cut from 5.57% to 5.18%.

Nationwide mortgage rates

At Nationwide (NBS.L), five-year purchase fixed rates start from 4.59%, with a £999 fee for borrowers with at least a 40% deposit. Unchanged from last week.

Assuming a £300,000 house where you need to borrow £180,000, this would put monthly payments at £1,009.72 per month.

Equivalent two-year rates start from 4.84%, also unchanged.

Halifax mortgage rates

Halifax, the UK’s biggest mortgage lender, has hiked the cost of some of its deals across a range of mortgages.

The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate of 4.96% with a £999 fee for first-time buyers. Higher than last week’s 4.80%.

The equivalent five-year rate starts at 4.62% (also 60% LTV), also higher than the previous 4.58%.

It also offers a 10-year deal with a mortgage rate of 4.93%.

Cheapest mortgage deal on the market

As under 4% mortgage rates are off the market it makes it harder for prospective homeowners to say they’ve secured a good deal.

The 4.40% deal NatWest offers appears to be one of the cheapest rates available but it requires a 40% deposit, so you will need a hefty amount of cash upfront to secure the deal.

Read more: Which first-time home buyer scheme is right for me?

Given that the average UK house price sits at £261,962, a 40% deposit equates to about £105,000.

Borrowers would need to spread their home loans over more than 70 years to be able to afford the same mortgages on offer just two years ago, banks have said.

There is also a new mortgage product promising to help first-time buyers get on the property ladder with just a £5,000 deposit.

Yorkshire Building Society is offering a deal that will enable first-time buyers across England, Scotland and Wales with a £5,000 deposit to purchase a property valued at up to £500,000.

It means first-time buyers will potentially be able to get on the ladder with as little as a 1% deposit.

Will mortgage rates go down in 2024?

Mortgage rates have risen substantially as the Bank of England increased the interest rates to a 16-year high in a bid to tackle inflation.

Until now, the consensus was that interest rates have peaked and that 2024 will see the Bank start to cut rates as inflation eases.

However, inflation slowed down less than expected, pushing City investors to cut their forecasts for how much the Bank of England will cut interest rates this year. Traders are now pricing in just two interest rate cuts this year, compared to expectations of five cuts at the start of 2024.

If the BoE makes any cuts this year, mortgage rates will come down, but not as much as expected for 2024.

About 1.6 million existing borrowers have relatively cheap fixed-rate deals expiring this year.

Watch: First-time buyers are baffled by property jargon

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