Mortgage Rates Fall as Bank of England Holds Base Rate – A Boost for UK Homebuyers
UK mortgage borrowers received a welcome boost this week as major lenders slashed mortgage rates following the Bank of England’s decision to hold interest rates steady at 4%.
In a clear sign that confidence is returning to the housing market, average mortgage rates have dropped across the board. According to data from Uswitch, the typical two-year fixed mortgage fell to 4.59% (down from 4.75%), while the five-year fixed rate eased to 5.03%. These figures reflect deals at a 75% loan-to-value (LTV) ratio — where buyers provide at least a 25% deposit.
Leading lenders including Nationwide, HSBC, Barclays, Halifax, and NatWest have unveiled fresh rate cuts and lending incentives to attract buyers and remortgagers ahead of the Autumn Budget.
Major Lenders Slash Rates and Expand Lending Criteria
Nationwide Building Society announced mortgage rate reductions of up to 0.25 percentage points across its range of two-, three-, five- and ten-year fixed products. The lender now offers a five-year fixed deal from 4.13% and a two-year fix from 3.89% for first-time buyers.
HSBC UK made headlines by introducing a higher loan-to-income (LTI) ratio of up to 6.5 times annual income for its Premier customers — a move set to boost affordability for higher-earning borrowers. The bank’s most competitive rates include a five-year fix at 3.99% (or 3.96% for Premier customers) with a £999 fee, and a two-year fix at 3.84% for 60% LTV applicants.
Barclays and Halifax also trimmed their fixed-rate products, with Barclays cutting its five-year fix to 3.98% and its two-year fix to 3.73%. Halifax now offers a five-year deal at 4.17% and a two-year fix at 4.01%, marking its lowest levels in months.
NatWest currently leads the market with the cheapest five-year fixed rate at 3.84% and two-year fix at 3.71%, though both require a 40% deposit.
Market Optimism Builds as Rate Cut Hopes Rise
The latest moves follow the Bank of England’s decision to hold the base rate at 4%, as inflation steadied at 3.8% year-on-year. With markets increasingly pricing in a potential rate cut in December, analysts say the current window may offer some of the most competitive deals of the year.
Alice Haine, personal finance expert at Bestinvest, commented:
“For mortgaged homeowners, affordability has finally started to improve. Rate cuts, slower house price growth, and stronger wage gains have eased pressure. However, uncertainty around the upcoming Budget and potential property tax changes still weighs on confidence.”
What It Means for Borrowers
Mortgage affordability has significantly improved compared to last year when average rates topped 6%. Yet, borrowers coming off ultra-low fixed deals secured before 2022 may still face higher repayments. Experts advise locking in a new fixed deal quickly, as volatility could return if economic data shifts before the Budget.
As lenders compete to attract new business and secure market share, 2025 is shaping up to be one of the most competitive years for UK mortgage rates in recent memory — a glimmer of relief for first-time buyers and homeowners alike.
