Lenders fire up mortgage wars as rates touch 3.5% in big boost to buyers and owners

Homeowners and potential buyers are facing a mortgage surge as lenders scramble to take on business en masse, with rates falling as low as 3.51 per cent.

Those who signed five-year fixed-term deals during the post-lockdown buying spree of 2020 will be watching anxiously as they come up for renewal later this year. At the time, they were using mortgage products with extremely low interest rates; However, interest rates rose rapidly in 2022 and 2023 to combat inflation.

Although both have trended downward since then, rates remain high. But with Budget uncertainty leaving people unsure whether to sell in the second half of the year, the property market has stalled and lenders have taken action of their own.

A number of mortgage products fell as the budget was announced, and in the weeks since Barclays, Santander, NatWest, Nationwide and others have cut their best available interest rates in anticipation of the base rate being cut by the Monetary Policy Committee (MPC) when the Bank of England votes next week.

Mortgage deals are based on swap rates rather than the Bank of England’s interest rate, which is a direct base rate, and the expectation is that some deals could continue to fall as the fight for customers intensifies.

So it’s notable that the average two- and five-year fixed deals are both below 5 per cent, the lowest rate since September 2022, according to Moneyfacts.

Barclays will see some remortgage deals go as low as 3.7 per cent from Tuesday, NatWest has an offer of 3.62 per cent and a product from Santander will run as low as 3.51 per cent.

Meanwhile, the lowest rate across the country was 3.58 percent last week; The housebuilder, the UK’s second-largest mortgage provider, has offered a fixed mortgage rate below 3.6 per cent for the first time in more than three years.

It’s worth noting that the best headline deals are typically reserved for loan-to-value (LTV) arrangements of around 60 percent and can often have additional fees attached to them, so these aren’t always best for everyone’s particular situation.

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However, they still state that there are discounts on many products with different credit providers; This is better for consumers as more options become available in price and credit range.

Property prices across the UK have risen only marginally from month to month over the past month, but delving deeper into the data, Jonathan Hopper of Garrington Property Finders noted regional differences creating for a “K-shaped” development: “Prices rose in the north of England, Scotland and Northern Ireland, while falling in London and surrounding counties,” he said.

“The decline in London prices has accelerated. Prices across the capital have fallen by 1 per cent in the year to November, but the declines have been even sharper in the main regions.”

The expectation is that, as prices and mortgage deals become more attractive, this could push middle market and first-time buyers to make the move in the new year.

“In a year where budget speculation has constrained demand for much of the last six months, fixed mortgage rates have supported housing market activity. We expect rates to continue to fall in 2026 and sub-4 per cent mortgages to become available across a wider range of loan-to-value deals,” said Tom Bill, head of UK housing research at Knight Frank.

“The tougher financial environment for buyers after the Budget, including a freeze on the income tax threshold, will keep demand increasingly in check.”

Shaun Sturgess, director of Sturgess Mortgage Solutions, added: “Lenders appear to be giving borrowers an early Christmas present and you can really feel the battle to be the most competitive heating up.

“After a challenging 2025, this momentum is exactly what buyers and homeowners were hoping for. Any discounts on essential two-year products make a real difference to affordability and bring a renewed sense of optimism as we head into the new year.”