Mortgage rates across the UK have seen an increase. The average rate on a two-year fixed deal now stands at 5.89%, a jump from last week’s 5.79%. For those looking at longer-term stability, the average rate for a five-year deal is now 5.34%, slightly up from 5.31% last week, as per data from Uswitch.

This rise in rates is happening against a backdrop of uncertainty about the future direction of the Bank of England’s (BoE) interest rate policies. After maintaining the interest rate at a 16-year peak of 5.25% for the fifth consecutive time, the market has been jittery, affecting mortgage rates directly.

Impact on Homebuyers and Homeowners

The escalating rates have put additional pressure on both potential homebuyers and those considering remortgaging. With the Bank of England only expected to make two cuts in 2024, down from an earlier prediction of five, the mortgage market remains daunting.

This financial strain is reflected in the housing market, with a noticeable decline in house prices last month. According to Ranald Mitchell, director at Charwin Private Clients, the dip in prices is a result of buyers becoming more cautious due to the creeping mortgage rates. “The fall in prices in April comes as no surprise,” he stated, highlighting the erosion of earlier market optimism.

Spotlight on Major UK Banks’ Mortgage Rates

HSBC

HSBC has long moved on from its lower rate of 3.99% for a five-year deal, now offering a minimum rate of 4.48% for the same term. Their two-year deals start at 4.83%, with a £999 fee, provided the buyer can front a 60% loan-to-value (LTV) ratio. More accessible options like the 95% LTV deals come with higher rates, showing how your financial position and deposit size significantly affect your rate.

NatWest

NatWest has made some reductions in its rates but still falls short of its earlier 3.94% offer. Now, the best a borrower can get for a five-year deal is 4.40%, with a £1,495 fee, assuming a 60% LTV. The bank also caters to environmentally friendly properties by offering the same rate for green mortgages with a lower fee.

Santander

At Santander, rates have also risen, with the current five-year fixed deal at 4.35%, assuming a 40% deposit, an increase from last week’s 4.22%.

Barclays and Nationwide

Barclays and Nationwide have similarly increased their rates. Barclays’ cheapest five-year deal now stands at 4.47%, while Nationwide offers a starting rate of 4.59% for the same term, reflecting a steady increase over the past week.

Halifax

Halifax has mixed news, with some rates decreasing and others increasing. Their two-year fixed rate for first-time buyers is now 4.80%, up from 4.60%, and the equivalent five-year rate is 4.58%.

Cheapest Deals and First-Time Buyers

While sub-4% mortgage deals have vanished, some relatively affordable options remain. Santander’s 4.35% rate is one of the lowest available but requires a hefty 40% deposit. Meanwhile, NatWest’s 4.40% deal is a close second.

For first-time buyers, there’s some good news from Yorkshire Building Society, offering a deal for those with just a £5,000 deposit to buy homes valued up to £500,000, potentially revolutionising access to property for many.

Looking Ahead

The general expectation was that mortgage rates would decrease throughout 2024 as inflation eased. However, with slower-than-anticipated inflation reductions, traders have adjusted their forecasts, now expecting fewer rate cuts from the Bank of England. This suggests that while mortgage rates may decrease slightly, significant reductions are unlikely in the near future.

For those with expiring fixed-rate deals, approximately 1.6 million borrowers will be looking at potentially higher rates as they renew or switch.