January mortgage update: Some lenders have raised mortgage rates over last week but five-year fixes still starting from 4.07%
So far this month there has been a mixture of fixed-rate price increases and reductions despite market volatility.
Many of the bigger banks and building societies have not raised the cost of their most competitively priced rates. This means some mortgages, mainly for those with larger deposits, are still priced at just over 4%.
Major banks like HSBC for Intermediaries, Barclays, and Halifax have maintained competitive mortgage offerings. HSBC, for instance, has a sub-4.10 % five-year fixed deal and Nationwide still has a sub-4.2% two-year fix.
Average mortgage rates fell at the beginning of this year, with the margin between two- and five-year fixed rates at its lowest level in two years. According to Moneyfacts UK, the average two-year fixed rate has dropped to 5.48%, while the average five-year fixed rate decreased to 5.25%.
Aaron Strutt, product director at Trinity Financial, says: “Mortgage rates are susceptible to market confidence and pricing pressures. The cost of funding mortgages increased significantly a few weeks ago, but these rises have subsided, and it looks like prices may come down or at least stabilise over the coming days.”
City AM newspaper reports market traders anticipate just two Bank of England interest rate cuts this year, with one more cut priced in for 2026. This would leave the benchmark bank rate at 4.0 per cent, down from the current 4.75 per cent. However, Goldman Sachs has argued that money markets significantly underestimate the chance that the Bank of England will have to step up the pace of cutting interest rates. Fixed rates could get cheaper this year if the investment bank is correct.
Many outside pressures are bringing financial instability, prompting many borrowers to lock into five-year fixes for payment security.
What else has been happening in the mortgage industry?
Nationwide for Intermediaries has increased the minimum income required to qualify for its 6x salary Helping Hand mortgage, potentially enabling first-time buyers to borrow up to 33% more than with Nationwide's standard products.
There is a regulatory limit on lending to customers with higher loan-to-income levels. To ensure Nationwide remains within these limits, the building society increased the sole applicant's minimum income required from £35,000 to £40,000.
The government is considering relaxing mortgage affordability rules to support first-time buyers in homeownership. It is also set to review the rules and tests regarding how much applicants can borrow relative to their income. Lenders are currently limited in the number of loans they can offer applicants who need to borrow 4.5 times their salary.
Nikhil Rathi, Chief Executive of the Financial Conduct Authority, recently wrote to the Prime Minister, Chancellor, and Secretary of State, saying he understands the need to remove unnecessary rules. The regulator will also “begin simplifying responsible lending and advice rules for mortgages, supporting home ownership.”
Santander is looking at exiting the UK market, according to press reports
Santander is reportedly contemplating leaving the UK market due to regulatory challenges and operational costs.
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The information contained within was correct at the time of publication but is subject to change.
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