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Best UK mortgage deals of the week

The red brick Victorian row houses of Muswell Hill with panoramic views across to the skyscrapers and financial district of the city of London.
About 1.6 million existing borrowers have relatively cheap fixed-rate mortgage deals expiring this year. (coldsnowstorm via Getty Images)

Mortgage rates have risen this week, as future homeowners are still struggling to find a decent price and more are taking loans well into retirement.

The average rate on a two-year fixed deal this week stood at 5.89%, higher than the previous 5.69%, while rates for a five-year deal came in at 5.39%, also higher than last week's 5.24%, according to figures from Uswitch.

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 sixth consecutive time.

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

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

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"It's been a mixed bag for mortgage rate changes over the past week. Natwest increased rates on selected products last Wednesday, only for Barclays, Santander and TSB to announce decreases on selected products towards the end of the week," Kellie Steed, Uswitch's mortgage expert told Yahoo Finance UK.

"Several lenders actually increased mortgage rates following last month's inflation announcement, after it didn't fall by as much as was hoped. For those who need a new mortgage in this fast-changing market, whether for a new or an existing property, make sure to consider all your options and seek expert advice."

Read more: What does the general election mean for your finances?

The market is also reacting to the surprise announcement of general elections on 4 July

"The election announcement is likely to stall the pace at which new sales are being agreed in the coming weeks as we run up to the start of the summer slowdown. Most buyers well into the home buying process close to agreeing on a sale will ideally want to push through and agree to sales now. Those who are earlier in the process may look to delay decisions until the autumn after the election is over,” Richard Donnell, executive director of Zoopla, said.

"Overall, we don’t see the election having as big an impact as in previous years… What businesses and landlords will want to see from all political parties are concrete plans for how we can boost housing supply across all tenures while getting the right reforms to the private rented sector to ensure we maintain supply while giving renters more protections,” he added.

Young homebuyers are being forced to gamble with their retirement prospects by taking on ultra-long mortgages.

Read more: UK inflation falls to 2.3% in April inching closer to Bank of England target

In the last three years, researchers have noted a surge in mortgage terms that see homeowners locked into mortgages running beyond the state pension age.

This is particularly rife among those under 30, data from the BoE highlighted.

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 4.40% for five years, a drop from last week’s 4.48%.

Looking at the two-year options, the lowest rate comes in at 4.79%, with a £999 fee. Lower than last week’s 4.83%.

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.

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

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.

NatWest (NWG.L) has made some changes to 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 offering 4.32% for a five-year deal with a £1,495 fee, assuming a 60% LTV. However, after five years the rate almost doubles to 8.24%.

Read more: How to protect your finances during divorce

It offers 4.42% for green mortgages – this product is available for properties with an energy performance certificate (EPC) rating of A or B – and the fee drops to £995.

For a two-year fix, the cheapest a customer can get is 4.82% online, with a product fee of £1,495, higher than the 4.77% offered last week.

Santander (BNC.L) has also moved away from its under 4% mortgage with a five-year fix coming in at 4.38%, assuming you have a 40% deposit. Last week this deal was on the table for 4.47%.

A 60% LTV two-year fixed rate with a £999 purchase fee used to be priced at 4.88%, but now sits at 4.80%. A 75% LTV two-year fixed rate, with a £999 purchase fee is priced at 4.58%, lower than last week’s 4.97%.

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 4.34%. Still, it is lower than last week’s 4.47%.

When it comes to two-year mortgage deals, the lowest you can get is 4.84%, 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%.

Santander has slashed selected rates for residential and buy-to-let borrowers, available through brokers, by up to 0.27 percentage points.

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 puts monthly payments at £1,009.72 per month.

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

Halifax, the UK’s biggest mortgage lender, will cut two and five-year fixed rates for residential borrowers by up to 0.19 percentage points this Friday, but its cheapest deals remain untouched.

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

The equivalent five-year rate starts at 4.62% (also 60% LTV), just two weeks ago that stood at 4.58%.

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

Nicholas Mendes, head of marketing and mortgage technical manager at John Charcol, said: “This latest reprice from Halifax reflects the current sentiment amongst lenders.

“[Wednesday’s] inflation data unfortunately means markets will be pricing in a prolonged hold, meaning mortgage rates will remain around their current levels for a bit longer.

“It’s important to note that until an official bank rate cut happens, lenders will exhibit mixed attitudes.

“Those with smaller pipelines may be more proactive in implementing reductions.”

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 4.32% 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 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 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 could get on the ladder with as little as a 1% deposit.

Mortgage rates have risen substantially as the BoE increased 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 BoE will cut interest rates this year. Traders are now pricing in just one or two 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: Halifax reduces mortgage prices despite inflation dashing June Bank of England rate cut hopes

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