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Best UK mortgage deals of the week

Housing development in suburban area aerial view
The Bank of England might only make one interest rate cut this year, in a blow to mortgage holders. (Richard Johnson)

Average mortgage rates are unchanged from the previous week but overall homeowners are still struggling to find a decent mortgage rate.

The average rate on a two-year fixed deal this week stood at 5.74%, while for a five-year deal, rates came in at 5.24%, according to figures from Uswitch.

The market appears to be volatile, as the higher costs providers are paying to fund mortgage lending have pushed many lenders to axe some of the cheaper deals. Still, some lenders such as NatWest and Halifax have slightly improved their offers.

This follows the Bank of England’s (BoE) 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: “Again a fairly static week for average rates, lenders both increasing and decreasing their deals have likely maintained this balance. Whereas Santander and TSB have both made reductions on some of their fixed-rate options, the Bank of Ireland have increased some of theirs. Virgin Money, on the other hand, has both reduced some deals and increased others in their range.

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"While recent speculation was that the base rate would fall in June, many experts believe it could now be August, or even later when we finally start to see the base rate and mortgage rates fall. This is largely due to the minimal fall in inflation announced yesterday (from 3.4% to 3.2%), which it seems, has already impacted swap rates. This may result in increased mortgage rate volatility in the coming weeks."

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 4.24% for five years.

Looking at the two-year options, the lowest rate comes in at 4.63% and a £999 fee. These deals are unchanged from the previous week.

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 £1495.

Santander mortgage rates

Santander (BNC.L) has also moved away from its under 4% mortgage with a five year fix coming in at 4.21%, assuming you have a 40% deposit.

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 4.68%.

All these deals are cheaper than last week's offering.

Barclays mortgage rates

Barclays (BARC.L) has a five-year deal for prospective homebuyers with a 40% deposit (60% LTV) that comes in at 4.17%. The fee is £899. The bank has a 4.16% rate for the same deal but that is reserved for Premier Exclusive clients.

Read more: How hard is it to get on the property ladder?

When it comes to two-year mortgage deals, the lower you can get is 4.54%, same as before.

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.

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. Less than last week's 4.63%.

The equivalent five-year rate starts from 4.31% (also 60% LTV), down from 4.39%

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 4.17% deal Barclays 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. NatWest´s 4.19% offer also isn't that far off.

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.

Read more: Experts warn of 'serious risks' over new 1% mortgage

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.

Read more: What is the First Homes scheme and who is eligible?

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: UK inflation proves sticky, damping rate cut hopes

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