Yahoo Finance Best UK mortgage deals of the week
The latest mortgage round up
Mortgage rates have eased slightly this week but future homeowners are still struggling to find a decent price and more are taking loans well into their retirement age.
The average rate on a two-year fixed deal this week stood at 5.69%, below the previous 5.85%. while rates for a five-year deal came in at 5.24%, also lower than last week's 5.39%, 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 just two BoE cuts now expected in 2024, several lenders have raised rates – adding pressure on homebuyers and those looking to remortgage.
"Since last week’s base rate announcement, there has been some variation in how lenders have adjusted their rates. Overall average two and five-year fixed rates have edged up again across the big six lenders, albeit only slightly. However, when looking at the market as a whole, both two and five-year fixed rates have seen a 0.15% drop since the Bank of England shared their decision," Kellie Steed, Uswitch's mortgage expert told Yahoo Finance UK.
"This is likely due to a fall in swap rates and the growing confidence among lenders that the BoE will announce a cut to the base rate within the next few months. If you’re approaching a remortgage, now is a great time to lock in the best rate available to you, as competition across the market begins to stir. If rates continue to fall in the coming months, it’s worth noting that you’re not tied into a new deal until your old one ends. So the farther in advance you look at your remortgage options, the better," she added.
Young homebuyers are being forced to gamble with their retirement prospects by taking on ultra-long mortgages.
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.
It suggests that more than one million new mortgages have been issued over the past three years with end dates beyond the state pension age.
"The challenge of getting on the housing ladder is forcing large numbers of young home buyers to gamble with their retirement prospects by taking on ultra-long mortgages," said Steve Webb, the former pensions minister and partner at LCP, the financial services group.
The number of possession claims has soared as families are squeezed by the cost of living crisis and high interest rates.
Compared to the same quarter in 2023, mortgage possession claims increased from 4,035 to 5,182 (28%), orders from 2,532 to 3,019 (19%), warrants from 2,636 to 2,881 (9%) and repossessions by county court bailiffs from 729 to 759 (4%), according to the latest figures from the Ministry of Justice.
Landlord possession actions have also increased, with claims jumping from 23,389 to 24,874 (6%), orders from 17,644 to 18,154 (3%), warrants from 10,503 to 11,407 (9%) and repossessions from 6,501 to 6,864 (6%).
Private and social landlord claims remained concentrated in London, with six and five of the highest ten claim rates respectively.
The median average time from claim to mortgage repossession decreased to 45.7 weeks, down from 60.9 weeks in the same period in 2023.
"Lenders offer a range of support to anyone worried about their finances, with teams of trained experts ready to help. If you are struggling, please reach out to your lender as soon as possible to discuss the support options available, Charles Roe, director of mortgages at UK Finance, said.
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.
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.
HSBC said that from Friday it will be cutting rates across its full range of products although it did not say by how much.
NatWest mortgage rates
NatWest (NWG.L) has changed 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 4.32% 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: Best savings accounts that offer above inflation rates
It offers 4.42% for green mortgages – this product is available for properties with an energy performance certificate (EPC) rating of A or B – but the fee 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.
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%.
From this Friday, deals are even cheaper. Across its purchase deals, reductions have been made to select three- and five-year fixed deals, including the standard five-year fix at 60% LTV with a £899 fee, which has gone down from 4.47% to 4.34%.
At 75% LTV, the five-year fix with a £899 fee has been cut from 4.73% to 4.44%, while the fee-free option has gone down from 4.9% to 4.58%.
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 kept its offering unchanged after hiking the cost of some of its offers across a range of mortgages the previous week.
The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate of 4.96% with a £999 fee for first-time buyers. It used to be 4.80%.
The equivalent five-year rate starts at 4.62% (also 60% LTV) when just two weeks ago that stood at 4.58%.
It also offers a ten-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 4.32% 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 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 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 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: Bank of England holds rate at 16-year high, signals looming cut
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