Under 4%-deals hitting the market were expected to spark another mortgage war among big lenders but mortgage brokers warn that actually, more rises are on the way.
The average rate on a two-year fixed deal came in at 5.09%, unchanged from than last week, while average rates for a five-year deal came in at 4.95%, lower than the previous 4.98%, according to figures from Uswitch.
Alice Haine, personal finance expert at Bestinvest, said: “While the latest inflation data appears positive for consumers, almost three years of rapid prices rises have left their mark on household budgets and many are still trying to balance the books as their finances slowly recover from the high borrowing and living costs seen at the height of the cost of living squeeze.
"They will now be looking to the BoE for action on rates, as a second quarter-point reduction in November would help to ease borrowing costs further for those with mortgages and debts."
Santander and NatWest were the first among the big lenders to increase their lowest mortgage rates last week following a surprise rise in the cost of funding. HSBC this week also decided to increase some of its cheapest deals.
Orchard Financial Advisers managing director Ben Perks said: "More rises are on the way from big lenders.”
Despite the gloomy scenario, two-year fixed mortgages are still available from around 3.85% and five-year fixes from around 3.80%
Aaron Strutt, product director at Trinity Financial, said: "A range of banks and building societies still offer sub-4% fixed rates for property purchases and remortgages. The lenders are doing more to tempt borrowers to switch lenders rather than stick with their existing mortgage providers.
"We are helping lots of first-time buyers secure mortgages, and many want to complete their purchase well before the stamp duty increase."
HSBC has also revealed that it will now accept overseas credit history for UK mortgage applications.
The move will allow international mortgage applicants to retrieve their credit history for a UK mortgage application through a partnership with cross-border credit bureau, Nova Credit. This provides non-resident customers from eligible countries — Australia, Switzerland, the Philippines and the USA — and those who have recently relocated to the UK a more streamlined process.
Oli O’Donoghue, head of mortgages at HSBC UK, said: “International customers often face difficulties in accessing credit facilities from overseas or when moving to a new country.
"We’re proud to be the first major bank to provide this innovative service to make it easier for customers to utlilise their international credit history to help them secure a property in the UK, something that could be vital part of a relocation. It is important that we cater to all our customers, including the needs of our global customers."
All customers must have lived in the UK for a minimum of 12 months at point of application, or applicants must have a minimum income of ￡75,000 or a joint minimum income of ￡100,000 (excluding variable income).
HSBC will lend up to 85% loan to value (LTV) and the customer must have an acceptable visa type.
Mortgage lenders' attempts to lure in first-time buyers have stepped up with the UK's biggest building society allowing some to borrow more.
Nationwide has said that new borrowers can request a mortgage up to six times their income with a 5% deposit. But it would only be available for those taking out a five- or 10-year fixed-rate deal. The lender this week announced that it is offering its mortgage customers the opportunity to take out interest-free green loans of up to ￡20,000 as it incentivises homeowners to make the UK more energy efficient.
HSBC (HSBA.L) has a 3.89%% rate for a five-year deal. This is higher than last week's 3.82% and for those that have a Premier Standard account with the lender this rate has risen from 3.79% to 3.86%
Looking at the two-year options, the lowest rate comes in at 4.19% with a ￡999 fee, which is higher than the previous 4.14%.
Both cases assume a 60% 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 5.59% or 5.09% 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.
“The significant aspect of HSBC’s offer is the combination of a low rate and a manageable fee, making this deal highly attractive,” said Nick Mendes of John Charcol brokers.
NatWest (NWG.L) is offering 4.04% for a five-year deal with a ￡1,495 fee, after removing its market-leading 3.71% offer.
For a two-year fix, the cheapest deal comes in at 4.04%, more than last week's 4.02%. 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 3.95% with a ￡999 fee, assuming you have a 40% deposit — which is higher than last week's 3.75%.
For a two-year deal, the cheapest customers can get is 4.12% with the same ￡999 fee, which is also higher than the previous 3.92%. With this increase the market has lost all its sub-4% deals for a two-year fix.
Barclays (BARC.L) has dropped its market leading 3.71% five-year deal for prospective homebuyers with a 40% deposit (60% LTV). The same deal now comes in at 3.96%.
When it comes to two-year mortgage deals, the lowest you can get is 4.10%, higher than last week’s 3.90%.
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Nationwide (NBS.L) is offering a five-year fix at 3.99%, which comes with a ￡999 fee and requires a 40% deposit.
Nationwide offers a two-year fixed rate for home purchase at 4.09% with a ￡999 fee — also for borrowers with a 40% deposit. Both unchanged from the previous week
Halifax, the UK’s biggest mortgage lender, offers a five-year rate for 3.77% (also 60% LTV), which is unchanged.
The lender, owned by Lloyds (LLOY.L) has a two-year fixed rate deal coming in at 4.03%, with a ￡999 fee for first-time buyers, which the same as the previous week
It also offers a 10-year deal with a mortgage rate of 4.58%.
With mortgages below 4% quickly disappearing from the market, prospective homeowners are back to limited choices when it comes to finding a good deal.
Halifax currently has the cheapest deal on the market. However, its 3.77% offer requires a 40% deposit, so you will need a hefty amount of cash upfront to secure the deal. HSBC is close behind, with a 3.89% deal for a five-year fix.
Read more: Monthly mortgage payments surged by over ￡350 in past five years
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 just two years ago, banks have said.
There is also a new mortgage product promising to help first-time buyers get on the property ladder with just a ￡5,000 deposit. Yorkshire Building Society is offering a deal that enables first-time buyers across England, Scotland and Wales with a ￡5,000 deposit 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 now 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 will allow first-time buyers to borrow up to five-and-a-half times their income, in an effort to support more borrowers on to the housing ladder.
Mortgage holders and debt borrowers have been forced to pay record-high repayments in recent years due to the UK's hiked base rate being passed onto 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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However, even with inflation close to the BoE's target of 2%, traders are now pricing in just two more rate cuts, compared to expectations of five cuts at the start of 2024.
Matt Smith, Rightmove’s (RMV.L) mortgage expert, said: “While those looking to take out a mortgage soon shouldn’t expect to see drastically lower mortgage rates, we would expect the downward trend we’ve started to see continue."
He said that once there are "further reductions to the base rate, people should really start to see the impact. However, it’s important to keep in mind that mortgage rates are widely expected to eventually settle at higher levels than previously, with the market view that the base rate may eventually fall to about 3.25%."
About 1.6 million existing borrowers have relatively cheap fixed-rate deals expiring this year.
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