Most major lenders increased borrowing costs this week as the Bank of England warned that the US-Israel war on Iran could end up increasing monthly mortgage payments for more than 1 million UK households.
The average rate for a two-year fixed mortgage came in at 5.61% this week, higher than last week’s 5.23%, according to data from Uswitch.
The average five-year fixed deal came in at 5.63%, up from 5.32% previously. These are the average rates across all lenders for a 75% loan-to-value (LTV) mortgage, meaning buyers need a down payment of at least 25% of the purchase price.
The Bank of England (BoE) voted unanimously to keep interest rates on hold in the face of the Iran war this month. Before the outbreak of war in the Middle East, expectations had been that the rate would be cut to 3.5%, but the conflict has triggered a global economic fallout, ending hopes of falling interest rates this year.
Read more: Bank of England holds interest rates at 3.75% amid Iran conflict
In its latest financial stability report (FSR), the BoE said the UK economic outlook has “deteriorated”, increasing pressure on UK households and businesses.
The report highlighted that UK households are set to face greater financial pressure following the conflict, due to increased energy prices and elevated mortgage rates.
Banks have significantly increased the mortgage rates they offer and pulled a number of products from the market.
The FSR said average rates for two-year fixed-rate mortgages have increased by around 0.8 percentage points while five-year fixed-rate mortgages have seen a roughly 0.7 percentage point rise.
Current rates indicate that about 5.2 million UK mortgage holders could face an increase in their repayments by the final quarter of 2028. This compares with a prediction of 3.9 million from the Bank’s previous report before the start of the conflict in the Middle East.
Typical increases in mortgage payments would “remain modest” compared to many rises seen in recent years, it added.
The Bank also reported the total number of mortgage products available in the UK had fallen from 8,500 to 7,000.
This week, HSBC (HSBA.L), NatWest (NWG.L), Nationwide all increased mortgage costs. Barclays (BARC.L) was the only lender to keep rates on hold, while Halifax moved in opposite directions. It increased its five-year fix but cut costs for the two-year deal.
Here is more detail on major lenders’ mortgage rates this week:
HSBC (HSBA.L) has moved into 5%-mortgages territory, with a 5.17% rate on a two-year deal, with a £999 booking fee, higher than last week’s 4.57%. For those with a premier standard account with the lender, this rate is 5.14%.
Looking at the five-year options, the fixed standard rate is 5.18% with a £999 fee, which is more than the previous 4.68%.
Both cases assume a 60% LTV mortgage, meaning buyers need a deposit of at least 40%.
HSBC (HSBA.L) offers 95% LTV deals, so you only need to save for a 5% deposit. However, the rates are much higher, with a two-year fix at 5.99% or a five-year fix at 5.63%.
This is because someone’s financial situation and deposit size determine the rate. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky.
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The lender has recently unveiled a cashback offer of up to £2,000 to ease the upfront costs of entering the housing market.
The bank’s enhanced incentive package, which brokers say could ignite a fresh round of competitive pricing among high-street lenders, marks one of the most generous cashback schemes currently available. The measure is aimed at supporting borrowers struggling with deposit and moving costs at a time when affordability pressures remain high despite a recent easing in mortgage rates.
NatWest’s (NWG.L) two-year deal comes in at 4.47%, with a £995 product fee, higher than the previous 4.04%.
The cheapest five-year fixed deal is 4.92%, which also more than last week’s 4.49%. In both cases, you’ll need a deposit of at least 40% to qualify for the rates.
Barclays (BARC.L) has a two-year fix available at 4.60% with a £899 product fee, unchanged from the previous week. Its five-year deal also remains at 4.80%.
Barclays (BARC.L) launched 95% loan-to-value (LTV) mortgages for purchasers of new-build houses, in a move aimed at easing the path to home ownership, especially for first-time buyers.
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The offer applies to new-build houses with a maximum purchase price of £600,000. Previously, buyers were required to pay a 10% deposit, meaning a £60,000 deposit on a £600,000 property. Under the new criteria, that requirement could be halved to £30,000.
Earlier in the year, Barclays (BARC.L) launched a mortgage proposition to help new and existing customers access larger loans when purchasing a home.
Nationwide (NBS.L) has increased its two-year deal for first-time buyers from 4.75% to 4.90% this week. For a five-year deal, the rate rose from 5% to 5.15%. Both deals require a 40% deposit and come with a £999 upfront fee.
This is also the third straight week that the lender has increased borrowing costs.
First-time buyers also receive £500 cashback when they complete their mortgage with Nationwide (NBS.L).
The lender this week announced an expansion of its high loan-to-income (LTI) lending, a change that could see some borrowers access tens of thousands of pounds more than previously available.
Under the new terms, home movers and customers remortgaging will now be able to borrow up to six times their annual income. This enhanced offering extends to both new and existing customers moving home or remortgaging, and applies to loans with a loan-to-value (LTV) up to 95%.
Halifax, the UK’s largest mortgage lender, offers a two-year fix at 4.81% (also 60% LTV), which is lower than the previous 4.91%.
The lender, owned by Lloyds (LLOY.L), also offers a five-year rate of 4.95%, a jump from last week’s 4.90%.
It has a 10-year deal with a mortgage rate of 5.53%.
Santander (BNC.L) withdrew its 60% LTV mortgage products for first-time buyers on borrowing of less than £250,000 on two- and five-year terms last September.
A spokesperson for the bank said that the “change was part of a reprice following the changes to swaps after the Bank of England held interest rates”.
Santander (BNC.L) continues to offer products with LTVs of 85% or above for first-time buyers, with the cheapest two-year fix at 5.07% and the cheapest five-year fix at 5.01%.
Read more: Average UK house price rises to £277,186 in March
For home movers with a 40% deposit, Santander (BNC.L) is offering a two-year fixed rate of 4.82%, up from 4.43%, and a five-year deal of 4.76%, up from 4.51%.
The lender has launched a mortgage that lets first-time buyers borrow up to 98% of the property’s value.
The deal does require a minimum £10,000 deposit, though, so borrowers would need to be purchasing a home for £500,000 to have put down a deposit as low as 2%.
NatWest (NWG.L) offers the most competitive two-year deal on the market for first-time buyers, with a fixed rate of 4.47%. When it comes to a five-year fixed deal, Barclays takes the crown, with its 4.80% offer. However, any of these deals requires a hefty 40% deposit.
With the average UK house price at £277,186 in March, prospective homebuyers would need a deposit of over £110,000 to secure the cheapest rates.
A growing number of homeowners in the UK are opting for mortgage terms of 35 years or longer, with a significant rise in older borrowers stretching their repayment periods well into their 70s.
Skipton Building Society is allowing first-time buyers to borrow up to 5.5 times their income, helping more borrowers get on the housing ladder.
Leeds Building Society reduced the minimum household income requirement on its first-time-buyer mortgage range. This means single or joint first-time buyer applicants with a household income of £30,000 may now be able to borrow up to 5.5 times their earnings.
Read more: Multiple Bank of England interest rate rises expected after energy price surge
Another lender has launched a 0% deposit mortgage aimed at renters as competition in the niche gathers pace. Melton Building Society is the latest provider to introduce such a product. The mutual is offering a five-year fixed rate mortgage at 5.99%, with a £199 application fee and £199 cashback on completion.
Under a no-deposit arrangement, also known as a 100% loan-to-value mortgage, the lender finances the entire purchase price of the home.
The deal is initially available to borrowers living in the East Midlands, with a broader rollout planned later this year.
Meanwhile, Newcastle Building Society offers a First Step mortgage deal, where buyers only need to put down 2% of the house price.
Mortgage holders and borrowers have faced higher repayments in recent years, as the BoE’s higher base rate has been passed on by banks and building societies.
Analysis by UK Finance, the industry body, found that 1.8 million people on a fixed-rate mortgage will see their fixes expire in 2026.
Many homeowners will hope the BoE continues to cut interest rates. At the same time, savers will likely root for rates to remain at or near their current levels.
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