Yahoo Finance Best UK mortgage deals of the week
Average mortgage rates have moved higher compared to last week as future homeowners struggle to find a decent mortgage rate.
The average rate on a two-year fixed deal this week stood at 5.79, higher than the previous 5.74%, while rates for a five-year deal came in at 5.31%, above last week's 5.24%, according to figures from Uswitch.
Anxiety has set in among UK mortgage lenders, with rates being hiked left, right and centre, amid uncertainty about how the Bank of England's (BoE) interest rate path will play out.
This follows the BoE’s decision to leave UK interest rates on hold at their current 16-year high of 5.25% for a fifth consecutive time.
Uswitch mortgage expert Kellie Steed told Yahoo Finance UK: “Some mortgage lenders pulled deals to price them at a higher mortgage rate this week. A change that was largely expected, in response to the inflation news and subsequent rise in swap rates late last week. At least half of the big six lenders (HSBC, Barclays and NatWest) had all edged rates upwards at the time of writing, and it’s likely that others will follow suit.
"Building societies, such as Leeds and Yorkshire, and Accord Mortgages have also increased their fixed-rate deals this week. Economists expect interest rates to remain higher until at least autumn, so those approaching remortgage likely shouldn’t delay arranging a new deal in the hopes of any imminent rate cuts.
HSBC mortgage rates
Borrowers have long said goodbye to HSBC’s (HSBA.L) 3.99% for a five-year deal. The cheapest deal on 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% and a £999 fee. Last week this same deal came in at 4.63%.
Both cases assume a 60% loan to value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit.
Read more: Renting now cheaper than owning amid high UK mortgage costs
The lender offers 95% LTV deals, meaning that 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 loan-to-value (LTV), allowing buyers to access better deals because lenders consider them to be less risky.
NatWest mortgage rates
NatWest (NWG.L) has lowered 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 4.19% 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 only 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 4.64% online, with a product fee of £1,495.
Santander mortgage rates
Santander (BNC.L) has also moved away from its under 4% mortgage with a five year fix coming in at 4.22%, assuming you have a 40% deposit. That is 0.1% higher than just a week ago.
Read more: Is now the time to move from a variable to a fixed mortgage?
A 60% LTV two-year fixed rate with a £999 purchase fee is priced at 4.61%.
75% LTV two-year fixed rate, with a £999 purchase fee is priced at 4.92%, higher than last week´s 4.68%.
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%.
When it comes to two-year mortgage deals, the lower you can get is 4.83%, higher than last week's 4.54%.
Nationwide mortgage rates
At Nationwide (NBS.L), five-year purchase fixed rates will start from 4.34% with a £999 fee for borrowers with at least 40% deposit.
Read more: How hard is it to get on the property ladder?
Assuming a £300,000 house where you need to borrow £180,000, this would put monthly payments at £984.22 and the cost of the deal at £38,355.
Equivalent two-year rates start from 4.69%. No changes from the previous week’s deals.
Halifax mortgage rates
Halifax, the UK’s biggest mortgage lender, has lowered some of its deals across a range of mortgages.
The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate of 4.60% with a £999 fee for first-time buyers. Unchanged from last week.
The equivalent five-year rate starts at 4.31% (also 60% LTV), also unchanged.
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 4.19% 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 up front in order to secure the deal. Santander's 4.22% offer also isn't that far off.
Read more: Which first-time home buyer scheme is right for me?
Given that the average UK house price currently sits at £261,142, 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 that is 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 be able to potentially 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 one interest rate cut this year, compared to expectations of five cuts at the start of 2024.
If the BoE only makes on cut this year, mortgage rates will come down but not as much as originally expected for 2024.
About 1.6 million existing borrowers have relatively cheap fixed-rate deals expiring this year.
Watch: Labour has promised 25-year fixed-rate mortgages across the UK. Who do they benefit most?
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