Mortgage costs remained largely unchanged this week, as most high-street lenders refrained from announcing any reductions to their offers, except for HSBC (HSBA.L). As a result, prospective homeowners begin 2025 with no mortgage deals available at rates under 4%.
The average rate for a two-year fixed mortgage stands at 5.19%, a slight increase from the previous 5.15%, while five-year fixed deals average 4.98%, nearly identical to the previous 4.97%, according to data from Uswitch.
First Direct became the latest mortgage provider to reduce rates in 2025, cutting up to 0.30% off its fixed-rate deals.
Meanwhile, TSB unveiled a new mortgage product aimed at helping tenants purchase their rental homes. The 5&5 Concessionary Mortgage allows landlords to offer tenants a 5% discount on the property’s purchase price, with the buyer contributing a minimum 5% deposit.
HSBC, too, made a series of reductions across its mortgage range, while Leeds Building Society followed suit with similar cuts.
Read more: How to find your ‘forever home’ in 2025
Nicholas Mendes, mortgage technical manager at John Charcol, expressed optimism about the changes but offered a tempered view on the future of rates. “It’s been a positive start to the new year,” he said. “With competition slowly increasing among mainstream lenders.
“The rate cuts, such as those from First Direct and HSBC, highlight that lenders are keen to attract borrowers, but the scope for reductions remains limited.”
He added: “While we’re likely to see further rate cuts over the coming weeks, these are expected to be modest, with only minimal changes to the best deals currently available.”
HSBC has a 4.09% rate for a five-year deal. This is lower than the previous 4.15%. For those who have a Premier Standard account with the lender, this rate comes in at 4.06%.
Looking at the two-year options, the lowest rate stands at 4.20% with a £999 fee, a small drop from the previous 4.23%.
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 5.54% or 5.14% for a five-year fix.
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.
NatWest (NWG.L) is offering 4.07% for a five-year deal with a £1,495 fee, unchanged from last week.
Read more: UK house prices end 2024 on high
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 (BNC.L), 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.
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 (BARC.L) 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.
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It also offers a 10-year deal with a mortgage rate of 4.58%.
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. HSBC is close behind, offering a 4.09% 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.
Read more: UK house prices drop for first time in nine months
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 borrowers have faced record-high repayments in recent years, as the Bank of England’s increased base rate has been passed on by banks and building societies. Until now, the general expectation has been that interest rates have reached their peak, with many predicting that 2024 will see rate cuts as inflation begins to ease.
With 1.8 million fixed mortgage deals set to end in 2025, according to UK Finance, many homeowners will be hoping the Bank of England acts quickly to cut rates more aggressively. At the same time, savers will likely be rooting for rates to remain at or near their current levels.
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