Lenders respond differently to mixed economic indicators
Major lenders have adopted differing strategies on mortgage pricing this week, with Barclays increasing rates on its two- and five-year fixed products, while Halifax has reduced its lowest two-year fixed rate.
Barclays has increased its five-year fixed rate to 4.05% with an £899 fee, up from 3.95%. Its two-year fix is now 3.85%, also with an £899 fee, up from 3.75%.
The bank has introduced its Mortgage Boost scheme, allowing applicants to include a family member or friend’s income to increase borrowing capacity. For example, two applicants each earning £37,500 could borrow up to £270,000, compared to £168,375 for a single applicant.
Meanwhile, Halifax’s two-year fixed rate for first-time buyers has been reduced to 3.83% with a £999 fee, down from 4.09%. The lender has also increased the maximum borrowing amount on its five-year fixed products. Halifax’s five-year fixed rate is 3.99% at 60% LTV, unchanged from last week.
These changes come as the Bank of England lowered its base rate to 4%, offering some respite to borrowers. However, inflation, as measured by the consumer price index, rose to an 18-month high 3.8% in the year to July, remaining well above the central bank’s 2% target.
Affordability remains a significant challenge for UK mortgage holders. Recent analysis indicates that the average borrower is now spending nearly half of their gross income on repayments, a level not seen since the 2008 financial crisis.
Other major lenders’ rates
Nationwide’s lowest five-year fix for first-time buyers is 4.14%, with a two-year fix at 3.86%. Both require a 40% deposit and a £1,499 fee. The lender’s Standard Mortgage Rate has been reduced to 6.74% from Sept. 1, and tracker rates have also fallen in line with the base rate cut. The mutual has also lowered the minimum salary requirements for first-time buyers and joint applicants, potentially supporting an additional 10,000 buyers annually. The lender has also adjusted its affordability assessment, enabling some applicants to borrow more.
NatWest continues to offer a five-year fixed rate at 3.94% with a £1,495 fee and a two-year fixed at 3.88%, both requiring a 40% deposit.
Santander’s five-year fix for first-time buyers is 4.09% with a £999 fee, while its two-year fix is 3.94%, also with a £999 fee. The lender has raised rates on some products for first-time buyers, with increases of up to 0.11% on certain LTV bands.
HSBC’s five-year fixed rate remains at 3.90%, with a slightly lower rate of 3.87% for Premier Standard account holders. The two-year fixed rate stands at 3.78% with a £999 fee, unchanged from last week. These rates assume a 60% LTV. For those with a 5% deposit, rates increase to 4.94% for a two-year fix and 4.79% for a five-year fix. HSBC now offers the lowest five-year fixed rate among major lenders at 3.90%, and the lowest two-year fix at 3.78%, both requiring a 40% deposit.
The average two-year fixed mortgage rate edged down to 4.96%, from 4.98% last week, according to Moneyfacts. Five-year fixed rates remained at 5.01%.
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