Mortgage rates came down this week, providing much-needed relief for homeowners, with some big lenders like Santander (BNC.L) cutting rates. However, Donald Trump’s trade war could deliver a blow to mortgage holders as uncertainty takes hold.
The average rate for a two-year fixed mortgage stands at 5.02%, while five-year fixed deals average 5.09%, according to data from Uswitch.
The Bank of England held its interest rate at 4.5% last month after warning that global economic uncertainty has "intensified".
This is the lowest level for rates in more than 18 months, following a reduction from 4.75% in February — the third such cut since August 2024.
However, a word of caution has been issued for Britons, as the tariffs imposed by Trump could create further challenges.
Jason Hollands, managing director at wealth management firm Evelyn Partners, said: “As interest rates could potentially go either way as a result of this tariff bombshell, the knock-on effect on the rates that banks pay on savings and charge on mortgages is also very uncertain.
Read more: Will Trump's tariffs change Bank of England's interest rate plan?
"While savings rates might be more tied to the BoE’s benchmark rate, mortgage rates also tend to be influenced by bond yields. Global economic uncertainty can cause bond market volatility, so that’s an added variable that could swing mortgage rates.
"But the key outcome here is whether central banks — the Fed, the BoE and the ECB — react to any inflationary effects by hiking rates, or whether they overlook short-term and possibly one-off price rises to look at the real economy and potentially even cut rates more than is currently expected.”
Hargreaves Lansdown said there could be a risk that inflation means the Bank of England keeps the base rate higher for longer.
However, it also said that the Bank could be under pressure to make more cuts to support growth.
The uncertainty could make it more vital for people to shop around for a mortgage deal early.
The primary inflation measure, the Consumer Price Index (CPI), stood at 2.8% in the 12 months to February 2025, a slight decrease from the previous month. While this marks a significant drop from the peak of 11.1% seen in October 2022, it remains well above the Bank of England’s target of 2%.
This week, Santander has announced mortgage rate reductions across its new business.
Principality Building Society is also reducing mortgage rates, effective from 4 April. It will lower three-year fixed residential mortgage rates between 65% and 80% loan-to-value (LTV) by up to 0.05%. In addition, five-year fixed rates at 90% LTV will see reductions of as much as 0.12%, while five-year fixes at 95% LTV will be lowered by 0.3%. For residential mortgages with cashback, a five-year fix at 90% LTV will be reduced by 0.14%.
However, several other lenders hiked their deals, with under-4% deals now off the table.
HSBC (HSBA.L) has a 4.15% rate for a five-year deal, up from the previous week’s 4.07%. For those who have a Premier Standard account with the lender, this rate is 4.10%, also higher than the previous sub-4% deal of 3.98%.
Looking at the two-year options, the lowest rate is 4.25% with a £999 fee, again higher than the previous 4.12%.
Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit.
Read more: Best places to live in England and Wales revealed
HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. However, the rates are much higher, with a two-year fix coming in at 5.47% or 5.19% for a five-year fix.
This is because their financial situation and deposit size determine the rate someone can get. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky.
NatWest (NWG.L) has a five-year deal coming in at 4.08% with a £1,495 fee, lower than last week’s 4.12%.
The cheapest two-year fix deal is 4.13%, also lower than the previous 4.15%. You'll need at least a 40% deposit to qualify for the rates in both cases.
At Santander (BNC.L), a five-year fix is 4.16%, higher than the previous week’s 4.10%. It has a £999 fee, assuming a 40% deposit.
For a two-year deal, customers can also secure a 4.15% offer, with the same £999 fee, which is untouched.
However, from 4 April, Santander will lower two-year fixed rate first-time buyer mortgages at 60% (LTV) for new borrowers by 0.07%.
Read more: How and when Trump's tariffs could impact UK inflation and consumer prices
All two-year fixed first-time buyer rates at 85-95% LTV will be reduced by up to 0.08%, while some two-year fixed residential remortgage rates at 60-75% LTV will be cut by 0.07%.
All five-year fixed residential remortgages at 75% LTV will be cut by up to 0.1%.
Its new business large loan, new-build, buy-to-let (BTL) and tracker rates will remain the same.
Further, Santander will cut some two-year fixes at 60-75% LTV and all five-year fixed product transfer rates at 75% LTV by up to 0.1%.
Santander has also introduced mortgage products tailored to first-time buyers with large loans, featuring two- and five-year fixed-rate deals at 60% LTV, albeit with a higher £1,999 product fee.
A five-year fix at Barclays (BARC.L) is 4.12%, which is higher than the previous 4.06%. For "premier" clients, this rate drops to 4.10%.
For two-year mortgage deals, the lowest you can get is 4.11%, unchanged from last week’s deal.
Barclays has launched a mortgage proposition to help new and existing customers access larger loans when purchasing a home. The initiative, known as Mortgage Boost, enables family members or friends to effectively "boost" the amount that can be borrowed toward a property without needing to lend or gift money directly or provide a larger deposit.
Read more: Best credit card deals of the week
Under the new scheme, a borrower’s eligibility for a mortgage can increase significantly by including a family member or friend on the application. For example, an individual with a £37,500 annual income and a £30,000 deposit might traditionally be able to borrow up to £168,375, enabling them to purchase a home priced at around £198,375.
However, with Mortgage Boost, the total borrowing potential can rise substantially if a second person — such as a parent — joins the application. In this case, if the second applicant also earns £37,500 a year, the combined income could push the borrowing limit to £270,000, enabling the buyer to afford a home worth up to £300,000.
Nationwide (NBS.L) is offering a five-year fix at 4.34%, with a £999 fee and a 40% deposit. This is unchanged from last week.
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 of 4.17% (also 60% LTV), which is higher than last week’s 4.12%.
The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate deal at 4.06%, with a £999 fee for first-time buyers, which is lower than the previous 4.15%.
Read more: How to negotiate house prices
It also offers a 10-year deal with a mortgage rate of 4.78%.
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 take advantage of lower rates.
With sub-4% mortgages off the market, prospective homeowners do not have a lot of reasons to smile when it comes to finding a good deal.
NatWest (NWG.L) currently offers the cheapest five-year fix at 4.08%, and Halifax offers the cheapest two-year deal at 4.06%. However, both require a 40% deposit, so you will need a hefty amount of cash upfront to secure the deal.
Given that the average UK house price is £366,189, a 40% deposit equates to about £147,000.
A growing number of homeowners in the UK are opting for 35-year or longer mortgage terms, with a significant rise in older borrowers stretching their repayment periods well into their 70s.
Read more: UK house prices stall in March ahead of stamp duty hike
Lender April Mortgages offers 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 buying alone and those buying with others can apply for the mortgage.
The company, which is part of independent Dutch asset manager DMFCO, offers interest rates starting at 5.20% and 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 help more borrowers get on 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 base rate has been passed on by banks and building societies.
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.
Read more:
Download the Yahoo Finance app, available for Apple and Android.
