The mortgage landscape has shifted significantly since the Bank of England’s decision to cut interest rates to 4.5% earlier this month. Major lenders, including Santander and Barclays, are now launching deals below 4% for the first time since November 2024, in what could be the start of a price war in the sector.

However, these low rates often require substantial fees and a 40% deposit. The average rate across the whole mortgage market for a two-year fixed deal currently stands quite a bit higher at 5.29% and the average five-year fix is 5.08%, (source: Moneyfacts). These figures are expected to come down considerably as more lenders join the race to attract borrowers.

Further base rate cuts are anticipated throughout 2025, with market forecasts suggesting rates could fall to somewhere between 3.5% and 4.25% by the end of the year and this is reflected in falling swap rates – the bank lending rates that influence fixed-rate mortgage pricing. Since January, five-year swaps have decreased from 4.18% to 3.84%, while two-year swaps have dropped from 4.31% to 3.97%.

First-time buyers may find more options becoming available, with the number of 95% loan-to-value mortgages reaching a near five-year high. However, the very latest rates for high loan-to-value products remain higher than at the start of 2025, as lenders continue to be cautious.

For the wider mortgage market, it is expected that more sub-4% fixed rates will become available in the coming months, particularly for those with larger deposits. This trend could accelerate if inflation continues to fall, though the broader economic outlook remains unclear.

Below is a selection of this month’s best buys from Moneyfacts.co.uk:

Two-year fixed rates: 4.23% from Yorkshire BS. Product fee £995. 60% LTV.
4.27% from Yorkshire BS. Product fee £995. 75% LTV.

Three-year fixed rates: 4.27% from Yorkshire BS. Product fee £995. 60% LTV.
4.29% from first direct. Product fee £490. 60% LTV.

Five-year fixed rates: 4.10% from Yorkshire BS. Product fee £995. 60% LTV.
4.14% from first direct. Product fee £490. 60% LTV.

Discounted variable: 4.24% For 2 years. From Progressive BS. Product fee £0. 75% LTV.
4.49% For 3 years. From Newbury BS. Product fee £425. 65% LTV.

BUY-TO-LET (BTL)

Best two-year fixed rate: 3.39% from The Mortgage Works. Arrangement 3.00% Advance. 65% LTV.

Five-year fixed rate: 3.94% from The Mortgage Works. Arrangement 3.00% Advance. 65% LTV

Best Discounted variable: 3.50% For 2 years. From The Stafford BS. Booking £100 ; Arrangement 5.00% Advance. 75% LTV.

The information we provide is our personal opinion and should not be relied upon for financial advice. Should you need financial advice or guidance please contact an appropriate professional.