A number of mortgage rates have dropped below 4%, bringing good news to first-time buyers and homeowners looking to remortgage.
Nationwide’s cheapest deal now stands at 3.89%, which is available as a two-year or five-year rate for existing and new customers with a 40% deposit. It has a £1,499 fee. The building society has another deal at 3.94%, with a £999 fee.
HSBC, Barclays, Santander and Coventry Building Society are among others to boast sub-4% deals.
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Mortgage rates have been on a downward trend over the past few months, with the “Trump tariffs” triggering further cuts from mortgage lenders in recent weeks.
Many banks and building societies have trimmed mortgage rates as the fallout from US tariffs continues to fuel forecasts of more interest rate cuts.
The International Monetary Fund (IMF) now expects the Bank of England to reduce interest rates three more times this year, despite the UK grappling with higher-than-expected inflation.
The Bank of England rate currently stands at 4.5%, after being cut from 4.75% in February. Rates were then held at its latest Monetary Policy Committee meeting on 20 March.
Most analysts had been expecting two more rate cuts this year, but this has now increased to three or even four after Trump announced bigger-than-expected tariffs on a number of countries.
The average two-year fixed mortgage rate is 5.22% (as at 23 April), according to Moneyfacts. This compares to 5.32% at the end of last month.
The average five-year fix is 5.12%, versus 5.18% on 31 March.
However, there is still some uncertainty, not just on what Trump will do (will he raise, cut or pause tariffs in the coming weeks?), but also in terms of economic headwinds in the UK.
Tax rises such as the National Insurance increase for employers, inflationary concerns and GDP figures will all play a part in what happens to swap rates – which influence the price of fixed-rate mortgage deals – and what the central bank decides in terms of changing interest rates.
We take a closer look at the outlook for UK mortgage rates this year.
Which mortgage lenders are cutting rates?
Nationwide cut mortgage rates by up to 0.25 percentage points today (23 April). For new and existing customers looking to move home, rates start from 3.89%. For first-time buyers, rates start from 4.09%.
Last week, Santander trimmed mortgage rates by up to 0.21 points and brought back some sub-4% deals due to “the recent reduction in swap rates”. Its two-year fixed rate for a home mover with a 40% deposit now stands at 3.97%. It has a £999 fee.
Barclays also cut some of its rates following the Trump tariffs turmoil. On 11 April, the bank reduced the rates on certain fixed deals to 3.99% for borrowers with a 60% loan-to-value. An £899 fee applies.
Coventry Building Society cut its two-year fixed rate deal to 3.89%. Meanwhile, TSB lowered some of its rates on 9 April. Its two-year fixed deal for first-time buyers and home movers with a 75-85% loan-to-value (LTV) dropped by 0.25 points.
Some of its product transfer and additional borrowing rates also fell by 0.05 points.
Clydesdale Bank has cut some of its deals. For example, its residential 85%-95% two and five-year core rates were reduced by up to 0.64 points. And its 85%-90% two-year professional rates fell by up to 0.2 points.
Skipton Building Society, the Co-operative Bank, Bank of Ireland, Metro Bank and Newcastle Building Society have also made rate cuts over the past month – along with smaller lenders MPowered Mortgages, Gen H and Pepper.
According to the analyst Defaqto, there are now 26 mortgage deals priced at below 4% on the market.
What is the forecast for mortgage rates?
The IMF expects three more interest rate cuts from the Bank of England this year. Analysts predict that the first of the trio will come when the Monetary Policy Committee (MPC) next meets on 8 May, taking the base rate to 4.25%.
The consultancy Capital Economics says the US tariffs war has “raised the chances that the Bank of England will cut interest rates from 4.50% to 3.75% this year, rather than to our forecast of 4%”.
Any cuts – or expected cuts – are usually favourable for mortgage rates.
Ian Futcher, a financial planner at the wealth manager Quilter, notes “there is still a huge amount of ambiguity in how things will play out” in terms of the trade tariffs and the impact on mortgage rates.
However, he says, at the moment, things look positive: “As swap rates have dropped, some lenders have moved to cut mortgage rates, with more likely to follow if market conditions persist. Homeowners with variable or tracker deals could benefit further should the Bank of England act.”
Elliott Culley, director at Switch Mortgage Finance, comments: "It's likely some lenders will try to take advantage of [lower swap rates], but the landscape keeps changing and if deals are made on trade we could see swap rates start to increase again.
“It's extremely difficult to predict whether this will be a flash in the pan or something more deep-rooted at this stage, so we may see some lenders acting more cautiously and not making any substantial changes yet."
Bear in mind that the mortgage rate is just one aspect of a deal. Borrowers need to watch out for extra mortgage costs as some deals have high fees attached that could offset any savings compared with other deals with higher rates but lower charges.
According to Moneyfacts, average product fees on a fixed-rate mortgage deal (not including no-fee products) have risen to £1,129 – an increase of £89 since March 2020.
In happier news, Moneyfacts also revealed last week that the choice of low-deposit mortgages has hit a 17-year high.
The data provider says the number of deals at the 95% loan-to-value tier has reached 442. The availability of deals at the 90% loan-to-value tier has risen to 845, also at its highest point in 17 years.
Should you fix your mortgage?
If the last two years of rises and falls have told us anything, it's that predicting falls in mortgage rates is not an exact science. So, if you have one of the estimated 800,000 fixed mortgage rates that is expiring this year, should you opt for another fixed deal?
David Hollingworth, of L&C Mortgages, says homeowners should start reviewing rates several months before their fix finishes. Locking in a rate now will offer protection against any future increases, and if rates fall before your current fix ends, you can switch onto the lower rate.
However, do double-check the time window for locking in a new deal, as some lenders have reduced theirs to just three or four months.
Fixing your mortgage will provide peace of mind. However, if you're happy to take a gamble, and believe that interest rates will fall over the duration of your next mortgage deal, you could consider a base rate tracker.
Nicholas Mendes, mortgage technical manager at the broker John Charcol, comments: “The key concern for many borrowers is affordability. Those who locked in rates at 1-2% several years ago are now facing remortgage offers of around 4-5%, which could add hundreds of pounds to their monthly repayments.
“Some may choose to fix their rate now for certainty, while others may opt for a variable or tracker mortgage in the hope that rates fall later in the year. There’s also the option of shorter 18 months to two-year fixed deals, allowing borrowers to reassess their options once rates have declined further.”
Three-year fixed deals are also available. This month, L&C Mortgages launched a range of three-year remortgage rates, starting from 4.02%.
Katie Brain, banking expert at Defaqto, points out that there is currently only a small gap between two and five-year mortgage rates, so “we could start to see more homeowners taking out longer term fixed mortgages”.
She adds: “When rates increased, many people were reluctant to fix for too long. Now we’re seeing those rates come down, those that want the financial stability of knowing their mortgage payment is fixed for a prolonged length of time may start to reconsider those five-year products or even longer.”
What about variable mortgage rates?
About 2.2 million homeowners are on variable-rate mortgages, which are linked to the Bank of England’s base rate. The average standard variable rate (SVR) is an eye-watering 7.6%, according to Moneyfacts. The average two-year tracker costs 5.16%.
Those on a high SVR would be wise to switch onto a fixed rate now. Even if fixed rates fall later this year, the money they save from getting rid of their expensive SVR earlier could make it worth it.
Rachel Springall, finance expert at Moneyfacts, says: “It’s essential for borrowers not to delay finding a new deal, particularly if they are sitting on an expensive SVR.
“However, with the lowest rate mortgages grabbing the headlines, it’s vital borrowers seek advice to find the most appropriate package for them, and not just be swayed by the initial rate.”
What about buy-to-let rates?
According to Moneyfacts, the average two-year buy-to-let mortgage rate today (23 April) is 5.08%, while the average five-year buy-to-let fix is 5.35%.
These rates seem quite competitive compared to how high they have been over the past few years. Buy-to-let mortgage rates were pushing 7% in the summer of 2023.
Buy-to-let investors also have greater choice, with some 3,898 buy-to-let mortgage products available.
Landlords will be hoping for a fall in mortgage rates this year, to help offset the 5% stamp duty surcharge and less generous mortgage interest tax relief.
A record number of previously-rented homes are being listed for sale, as financial strain pushes landlords to sell up.
Mortgage support available
Mortgage rates are much higher than when many people would have last remortgaged. Millions of homeowners will be coming off rates as low as 1% or 2%.
If you’re struggling to make your mortgage repayments, the good news is that lenders representing 90% of the mortgage market have signed up to the government’s mortgage charter. They include the big banks like Halifax, HSBC and Santander and building societies like Nationwide, Leeds and Skipton.
The charter is a series of support measures intended to help those in difficulty. Borrowers will be able to make a temporary change to their mortgage for six months to give them some breathing space, such as switching to interest-only payments or extending their mortgage term to reduce their monthly payments. Customers have the option to revert to their original term within six months by contacting their lender.
Around 1.4 million mortgages have benefitted from the mortgage charter since it was introduced in June 2023, according to the City watchdog.
Meanwhile, there is a 12-month delay before repossession proceedings can start against those who have missed payments. Regardless of whether your lender has signed up to the charter, all lenders also have a range of measures in place for customers experiencing difficulties.
Should I overpay my mortgage?
If you’ve got some spare cash and you're on a low rate, overpaying your mortgage can be a good way to protect yourself before your mortgage deal expires and you have to remortgage at a higher rate.
Our mortgage overpayment calculator shows how your monthly repayments will change and help you decide if it is worth it.
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