Securing an affordable mortgage has become increasingly challenging for UK homebuyers. The average rates for fixed mortgage deals have seen a fluctuation, with two-year deals averaging 5.85%, slightly down from 5.89%, and five-year deals climbing to 5.39% from 5.34% last week, according to Uswitch data.
This change comes amid a tense climate in the mortgage industry, provoked by the Bank of England’s decision to maintain the interest rate at a 16-year peak of 5.25% for the sixth consecutive session. The stability in rates, which was expected to bring a slight relief, has instead led to a hike in mortgage rates by various lenders, compounding the pressure on both first-time buyers and those considering remortgaging.
Financial experts have shared their insights on the unfolding situation. Alice Haine from Bestinvest notes the popularity of longer mortgage terms among first-time buyers, which has doubled from 10% in 2022 to 20% in 2023 for terms extending beyond 35 years. This shift suggests a strategic adjustment by new entrants in the property market to manage higher costs.
Meanwhile, Sarah Coles of Hargreaves Lansdown reflects on the broader economic implications, pointing out that while the Bank of England has downplayed inflation risks, it also acknowledges weaknesses in the economy. These factors might lead to a potential rate cut later in the year, which could influence mortgage rates slightly.
Consumer Guidance
As mortgage rates persist at high levels, advice for current mortgage holders becomes crucial. Sam Richardson, deputy editor of Which? Money, highlights the importance of proactive communication with lenders. He reassures that discussing options such as payment holidays or interest-only payments with banks does not impact one’s credit rating and can provide necessary relief during tough financial periods.
Specific Lender Updates
HSBC and NatWest Adjust Rates
HSBC and NatWest have both adjusted their mortgage offerings. HSBC has increased rates for both new and existing fixed-rate mortgages, with the lowest five-year deal now starting at 4.48%, and a two-year fixed rate at 4.83% with a £999 fee.
NatWest, on the other hand, now offers a 4.40% rate for a five-year deal available online, with a significantly reduced fee for properties that meet certain green criteria. This deal, however, requires a 60% loan-to-value ratio, meaning a substantial deposit is needed.
Changes at Other Major Banks
Santander and Barclays have also made adjustments. Santander’s rates have increased, with a two-year fixed rate now at 4.88% up from 4.78%. Barclays has hiked the rate for a five-year deal to 4.47%, although they have reduced some costs on higher loan-to-value deals.
Nationwide and Halifax are not far behind, with Nationwide maintaining its rates and Halifax increasing the costs for some of its mortgage products. The Halifax two-year fixed rate has risen to 4.96%, marking an increase from the previous week’s 4.80%.
Cheapest Deals and New Opportunities
Despite these rising costs, NatWest’s 4.40% five-year deal stands out as one of the most affordable options, requiring a 40% deposit. Additionally, a novel mortgage product from Yorkshire Building Society now promises to aid first-time buyers with a minimal £5,000 deposit to purchase homes valued up to £500,000, potentially changing the dynamics for new entrants into the housing market.
Will Mortgage Rates Decrease?
The outlook for 2024 remains uncertain with regards to mortgage rates. With inflation decreasing slower than anticipated, expectations for the Bank of England to cut interest rates have been tempered. While two cuts are still expected this year, the magnitude and impact on mortgage rates remain to be seen.