Best UK mortgage deals of the week

Pedro Goncalves
Updated

More deals under 4% are now on the market for those hoping to become home owners following the Bank of England's decision to cut interest rates, with another mortgage war looming that is set to benefit those trying to get on the property ladder.

The average rate on a two-year fixed deal this week stood at 5.89%, unchanged from last week, while rates for a five-year deal came in at 5.31%, actually an uptick from the previous 5.20%, according to figures from Uswitch.

The Bank of England cut interest rates to 5% at its August Monetary Policy Committee (MPC) meeting — the first reduction of the UK’s base rate in four years.

In a finely balanced decision, five committee members voted in favour of cutting rates, versus four who preferred to keep them unchanged.

Mortgage rates could fall to 3.5% by the end of the year as markets are betting on two more interest rate cuts by the end of the year.

Nationwide has launched a new five-year fix at 3.78% for new and existing customers moving house, however, borrowers need a minimum loan of £300,000 in order to qualify for the rate.

TSB has cut 0.25% off its two-, three- and five-year deals both for existing homeowners and first-time buyers. Barclays cut 0.15% off a two-year fixed rate deal for borrowers with only a 15% deposit, taking the rate to 5.07%.

HSBC also cut rates on two-, three- and five-year fixed products with deposits from 10% to 40%. Virgin Money (VMUK.L) meanwhile has cut 0.15% off its buy-to-let mortgage rates.

Stephen Perkins, managing director at brokers Yellow Brick Mortgages said: “Further rate cuts from two of the largest players in the mortgage market sends a clear and strong message to borrowers. Lenders are hungry for business during the remainder of 2024 and borrowers should take note. With competition between lenders heating up, now is a fantastic time for borrowers to make their property dreams a reality.”

HSBC (HSBA.L) has a 3.84% rate for a five-year deal. It lower than last week's 3.95% and for those that have a Premier Standard account with the lender, this rate comes down to 3.81%.

Looking at the two-year options, the lowest rate comes in at 4.24% with a £999 fee, which is lower than last week's 4.41%.

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

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HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. The rates are much higher, however, with a two-year fix coming in at 5.84% or 5.29% 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.

“The significant aspect of HSBC’s offer is the combination of a low rate and a manageable fee, making this deal highly attractive,” said Nick Mendes of John Charcol brokers.

NatWest (NWG.L) has also crossed the threshold of below 4% deals, offering 3.83% for a five-year deal with a £1,495 fee, unchanged from last week.

The minimum loan is £250,000, with early repayment charges (ERCs) starting at 4.5% in the first year, falling to 4.25%, then to 4%, 2.5% and finally 1%.

For a two-year fix, the cheapest deal comes in at 4.21%, the same as the previous week.

In both cases, you'll need at least a 40% deposit to qualify for the rates.

At Santander (BNC.L) a five-year fix comes in at 4.41% with a £999 fee, assuming you have a 40% deposit — which is the same as before.

For a two-year deal, the cheapest customers can get is 4.08% with the same £999 fee, also unchanged from last week.

Barclays (BARC.L) has kept the deals unchanged this week after joining the under 4% club the previous week. Its cheapest five-year deal for prospective homebuyers with a 40% deposit (60% LTV) comes in at 3.84%

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

When it comes to two-year mortgage deals, the lowest you can get is 4.22%.

Nationwide (NBS.L) has cut its under-4% offer further and now has a five-year fix for purchase at 3.78%. The deal comes with a £1,499 fee and requires a 40% deposit. It also only applies to loans of £300,000 or more.

Nationwide offers a two-year fixed rate for home purchase at 4.53% with a £999 fee — also for borrowers with a 40% deposit. This is lower than last week’s 4.65%.

Other deals include:

New customers moving home

  • Five-year fixed rate at 60% LTV with a £1,499 fee is 3.83% (reduced by 0.16%)

  • Five-year fixed rate at 60% LTV with a £999 fee is 3.88% (reduced by 0.16%)

  • Five-year fixed rate at 85% LTV with a £999 fee is 4.37% (reduced by 0.13%)

  • Two-year fixed rate at 60% LTV with a £999 fee is 4.35% (reduced by 0.11%)

Existing customers moving home

· Five-year fixed rate at 60% LTV with a £1,4991 fee is 3.83% (reduced by 0.16%)

  • Five-year fixed rate at 60% LTV with a £999 fee is 3.88% (reduced by 0.16%)

  • Five-year fixed rate at 85% LTV with a £999 fee is 4.37% (reduced by 0.13%)

  • Two-year fixed rate at 60% LTV with a £999 fee is 4.35% (reduced by 0.11%)

First-time buyers

  • Five-year fixed rate at 60% LTV with a £999 fee is 4.19% (reduced by 0.20%)

  • Five-year fixed rate at 85% LTV with a £999 fee is 4.46% (reduced by 0.09%)

  • Two-year fixed rate at 85% LTV with a £999 fee is 4.90% (reduced by 0.05%)

Remortgage

  • Five-year fixed rate at 60% LTV with a £999 fee is 4.20% (reduced by 0.12%)

  • Five-year fixed rate at 75% LTV with no fee is 4.50% (reduced by 0.18%)

  • Two-year fixed rate at 60% LTV with a £999 fee is 4.57% (reduced by 0.13%)

Halifax, the UK’s biggest mortgage lender, offers a two-year fixed rate of 4.36%, with a £999 fee for first-time buyers, the same as last week.

The lender, owned by Lloyds (LLOY.L) has a five-year rate going for 3.99% (also 60% LTV), which is also unchanged from the previous week.

It also offers a 10-year deal with a mortgage rate of 4.93%. This is unchanged from last week’s offers.

With mortgages below 4% back on the market, prospective homeowners are starting to have some choice when it comes to finding a good deal.

Nationwide currently has the cheapest deal on the market. However, its 3.78% offer requires a 40% deposit, so you will need a hefty amount of cash upfront to secure the deal. NatWest is close behind, with a 3.83% deal for a five-year fix, followed by HSBC’s 3.%.

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

Given the average UK house price sits at £291,268, a 40% deposit equates to about £116,500.

Borrowers would need to spread their home loans over more than 70 years 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 enables first-time buyers across England, Scotland and Wales with a £5,000 deposit to purchase a property valued at up to £500,000.

This means first-time buyers could get on the ladder with as little as a 1% deposit.

Also, lender April Mortgages is now offering buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, from a deposit of 5%. Both those buying alone and those buying with others can apply for the mortgage.

The company, which is part of an independent Dutch asset manager DMFCO has interest rates starting at 4.99%, with an application fee of £195.

Skipton Building Society has also said it will allow first-time buyers to borrow up to five-and-a-half times their income, in an effort to support more borrowers on to the housing ladder.

Mortgage holders and debt borrowers have been forced to pay record-high repayments in recent years due to the UK's hiked base rate being passed onto customers by banks and building societies. Until now, the consensus was that interest rates have peaked and that 2024 will see rate cuts as inflation eases.

However, even with inflation falling to target, traders are now pricing in just two rate cuts, compared to expectations of five cuts at the start of 2024.

Matt Smith, Rightmove’s mortgage expert, said: “The highly anticipated rate cut has finally arrived, and while those looking to take out a mortgage soon shouldn’t expect to see drastically lower mortgage rates, we would expect the downward trend we’ve started to see continue.

"This sets us up for hopefully further cuts to come, and when we have seen further reductions to the base rate, people should really start to see the impact. However, it’s important to keep in mind that mortgage rates are widely expected to eventually settle at higher levels than previously, with the market view that the base rate may eventually fall to about 3.25%."

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

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