Mortgage costs have come down slightly this week as several high street lenders announced cuts to their offers. However, under-4% deals have disappeared from the market.
The average two-year fixed mortgage rate now stands at 5.15%, while five-year deals have an average rate of 4.97%, according to figures from Uswitch.
New data from the Bank of England points to a continuing economic slowdown, with key indicators showing a cooling in both the housing market and consumer borrowing.
In November, British banks approved just 65,720 mortgages, falling short of the 68,500 anticipated by economists in a Reuters survey. This marks a further decline in mortgage lending, fuelling concerns that higher interest rates and cost-of-living pressures are dampening housing market activity.
UK households are struggling to keep up, and 149,000 mortgages have temporarily reduced monthly payments under new Financial Conduct Authority (FCA) rules.
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Despite the gloomy figures, mortgage brokers say homebuyer demand has been strong as of late.
Charles Yuille, managing director at Willow Brook Mortgages, said: “November was an average month, possibly due to the autumn budget taking the steam out of the market and hitting sentiment.
“That appears to be reflected in this data. Mortgage rates also edged up slightly, which may have dampened demand. But demand was still there due to the approaching stamp duty deadline.”
HSBC has a 4.15% rate for a five-year deal. This is unchanged from the previous week. For those who have a Premier Standard account with the lender, this rate comes in at 4.12%.
Looking at the two-year options, the lowest rate stands at 4.23% with a £999 fee, a drop from the previous 4.32%.
Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit.
HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. The rates are much higher, however, with a two-year fix coming in at 5.64% or 5.24% for a five-year fix.
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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.
David Stirling, independent financial advisor at Mint Mortgages and Protection, said: “HSBC were the first lender to tinker with their rates on Monday in what should prove to be a very active week as banks actively compete for applications to kickstart their targets for next year.
“HSBC is cherry-picking the borrowers they want, as they decrease rates for those with a bigger deposit and increase rates at higher loan-to-values.”
NatWest is offering 4.07% for a five-year deal with a £1,495 fee, unchanged from last week.
For a two-year fix, the cheapest deal comes in at 4.27%, also unchanged. In both cases, you’ll need at least a 40% deposit to qualify for the rates.
At Santander, a five-year fix comes in at 4.14% with a £999 fee, assuming you have a 40% deposit — again, unchanged from the previous week.
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For a two-year deal, the cheapest customers can get is 4.21% with the same £999 fee, which is also unchanged.
A five-year fix at Barclays now comes in at 4.11%, same as before. When it comes to two-year mortgage deals, the lowest you can get is 4.23%, also unchanged from last week.
Nationwide (NBS.L) is offering a five-year fix at 4.19%, which comes with a £999 fee and requires a 40% deposit. This is the same as the previous deal.
Nationwide offers a two-year fixed rate for home purchase at 4.34% with a £999 fee — also for borrowers with a 40% deposit. Again, unchanged from the previous week.
Halifax, the UK’s biggest mortgage lender, offers a five-year rate for 4.12% (also 60% LTV), which is unchanged from the previous week.
The lender, owned by Lloyds (LLOY.L) has a two-year fixed rate deal coming in at 4.23%, with a £999 fee for first-time buyers, which is also the same as before.
It also offers a 10-year deal with a mortgage rate of 4.58%.
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The lender has announced the launch of a new 1.5-year fixed-rate remortgage product in response to growing demand among borrowers for shorter-term deals.
Shorter-term fixes offer certainty over monthly payments while also allowing households to switch to a new deal sooner to capitalise on lower rates.
With mortgages below 4% no longer on the market, prospective homeowners are back to limited choices when it comes to finding a good deal.
NatWest has the cheapest deal on the market. However, its 4.07% offer requires a 40% deposit, so you will need a hefty amount of cash upfront to secure the deal. Barclays is close behind, offering a 4.11% deal for a five-year fix.
Given the average UK house price sits at £292,505, a 40% deposit equates to about £117,000.
Borrowers would need to spread their home loans over more than 70 years to afford the same mortgages on offer two years ago, banks have said.
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There is also a new mortgage product promising to help first-time buyers get on the property ladder with a £5,000 deposit. The deal is offered by Yorkshire Building Society to buyers across England, Scotland and Wales, allowing them to purchase a property valued at up to £500,000.
This means first-time buyers could get on the ladder with as little as a 1% deposit.
Also, lender April Mortgages is offering buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, from a deposit of 5%. Both those buying alone and those buying with others can apply for the mortgage.
The company, which is part of an independent Dutch asset manager DMFCO, has interest rates starting at 5.20%, with an application fee of £195.
Skipton Building Society has also said it would allow first-time buyers to borrow up to 5.5 times their income, in an effort to support more borrowers on to the housing ladder.
Leeds Building Society is increasing the maximum amount that first-time buyers can potentially borrow as a multiple of their earnings, with the launch of a new mortgage range. Aspiring homeowners with a minimum household income of £40,000 may now be able to borrow up to 5.5 times their earnings.
Mortgage holders and debt borrowers have been forced to make record-high repayments in recent years due to the UK’s hiked base rate being passed on to customers by banks and building societies. Until now, the consensus was that interest rates have peaked and that 2024 will see rate cuts as inflation eases.
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MPowered Mortgages’ head of product, Peter Stimson, said: “The return of inflationary pressure means the Bank of England is likely to adopt a ‘wait and see’ approach on any further base rate reductions, not just in December, but in the immediate months following as well.
“While this was to a large extent expected, it doesn’t offer any relief to mortgage lenders and is unlikely to allow them to reduce the interest rates they offer to new customers in the run-up to Christmas.”
About 1.6 million existing borrowers have relatively cheap fixed-rate deals expiring this year.
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