Best first-time buyer mortgage rates fall below 4% – will more lenders start to offer better deals?

First-time buyers can now get mortgages below 4 per cent.

In the past few days, a handful of lenders have launched 10 per cent deposit deals with rates as low as 3.96 per cent. 

These are on a two-year fixed rate, with five-year fixes remaining more expensive.  

While saving a deposit is still a struggle for many, first-time buyer numbers have been rising as house prices in many areas of the country flatline or fall. 

Falling mortgage rates make monthly payments more affordable, which could help more people on to the ladder. 

The best-buy rate is 3.96 with Lloyds Bank, based on a 10 per cent deposit, two-year fix. 

It marks a significant fall from the beginning of December 2025, when the cheapest rate available was 4.16 per cent. Banks have gradually reduced their rates since the Bank of England cut the base rate on 18 December.  

However, there is a vital caveat, in that this deal is only available to those who have a Club Lloyds bank account. 

Cheaper deals: Mortgage rates for first-time buyers have fallen below 4% 

This account has a £5 monthly fee, but it is waived if you pay in £2,000 or more each month. 

The mortgage deal comes with an arrangement fee of £1,199, however. Depending on your circumstances, a higher rate with a lower fee could work out cheaper – especially if you plan to roll the arrangement fee into the loan, where it will accrue interest. 

A couple buying a £250,000 home with a £2,500 deposit, and taking their mortgage over a 30-year term, would pay £1,189 per month on the Lloyds deal. 

Rachel Springall, finance expert at Moneyfactscompare, said: ‘First-time buyers may feel it’s not quite the right time to get a mortgage if they are struggling to build a sizeable deposit. 

‘However, as mortgage rates fall and a variety lenders relax their stress testing, some buyers might be surprised to find they could now get their first foot on to the property ladder.’

Bank of Ireland is offering a 3.99 per cent rate for the same circumstances, which comes with a higher fee of £1,495. That would cost the same couple £ 1,192 per month. 

It is open to customers in Britain, as well as the Republic of Ireland, and buyers will need to apply through a mortgage broker in order to secure the deal. Many mortgage brokers are fee-free for the buyer.  

In addition, Furness Building Society is offering a sub-4 per cent mortgage – but again, with a catch. 

It has a 3.97 per cent rate and a £749 fee, but is only available to those within postcodes LA (Lancaster), CA (Carlisle), PR (Preston) and FY (Fylde). 

There could be better first-time buyer mortgage rates soon to come, as lenders seek to capitalise on rising activity among first-time buyers. 

HSBC, Halifax and Yorkshire Building Society are among those offering mortgages at 90 per cent loan-to-value which are hovering near the 4 per cent mark.  

First-time buyer numbers are tipped to rise this year, as house prices flatline or fall in many areas across the country and sellers struggle to shift their homes.

Less competition in the market means they can potentially secure homes at a cheaper price.  

Research by TSB has found that more than nine in 10 first-time buyers negotiated on the property purchase price last year, securing a discount of £22,900 on average. 

Some mortgage lenders have also relaxed their rules to allow some first-time buyers to borrow more than they would have been able to previously. 

In addition, rent rises have eased off, potentially giving some first-time buyers a greater ability to save. 

However, the age of first-time buyers is still rising overall.  

Springall added: ‘According to UK Finance, the average first-time buyer mortgage term is 31, compared with 28 years a decade ago. 

‘The right choice of deal and term will come down to the individual, so it is imperative borrowers seek independent advice before they commit.’