Barclays cuts mortgage costs as BoE lowers interest rates

🗝️ Key Points

• Barclays has lowered mortgage costs for first-time buyers as the Bank of England (BoE) cut interest rates to 3.75%, paving the way for a further wave of cheaper mortgage deals.
• The average rate for a two-year fixed mortgage edged down to 4.59% from 4.66% last week, according to data from Uswitch.
• The average five-year fixed deal also eased to 5.04% from 5.06%.

Barclays has lowered mortgage costs for first-time buyers as the Bank of England (BoE) cut interest rates to 3.75%, paving the way for a further wave of cheaper mortgage deals before the end of the year.

The average rate for a two-year fixed mortgage edged down to 4.59% from 4.66% last week, according to data from Uswitch. The average five-year fixed deal also eased to 5.04% from 5.06%. Those are the average rates across all lenders for a 75% loan-to-value (LTV) mortgage, meaning buyers need to have at least 25% of the purchase price as a down payment.

The BoE cut interest rates to 3.75% from 4%, taking borrowing costs to their lowest level in almost three years.

The move follows signs of strain in the UK economy, with unemployment rising to a four-year high of 5.1% and private sector wage growth falling to its weakest pace since November 2020 in the three months to October. Official data published on Wednesday also showed inflation easing more sharply than expected, dropping from 3.6% to 3.2% in November.

Read more: Interest rates cut to lowest level in nearly three years

Mortgage experts said the rate cut had largely been priced in, but noted that recent inflation data could shape borrowing costs in the months ahead.

Matt Smith, Rightmove’s mortgages expert, said markets and lenders had anticipated the move, prompting mortgage rate cuts in December. “The financial markets and mortgage lenders have been expecting today’s Bank Rate cut for a while, and therefore responded early with mortgage rate cuts in December to round off the year,” he said.

Smith added that while rate cut headlines were positive for sentiment, this decision was unlikely to trigger further immediate reductions. “Bank Rate cut headlines are always positive for home-mover sentiment, even if this one has already been baked into mortgage rate cuts and won’t drive further drops.”

However, he said stronger-than-expected inflation data earlier in the week had improved market expectations for next year. “Don’t expect any big rate drops before Christmas while the property market is quieter, but it does mean we could now see a fresh round of rate cuts in the new year as lenders look to start the new year with a bang,” Smith said. He added that borrowers were likely to see larger reductions on two-year fixed-rate deals than five-year products, with the gap between the two expected to widen next year.

Karen Barrett, chief executive and founder of Unbiased, said the decision would provide a boost to households after recent economic weakness. “The Bank of England has delivered some early Christmas cheer, after voting to reduce the base rate from 4% to 3.75%,” she said.

Barrett pointed to data showing the economy had contracted unexpectedly ahead of the autumn budget, alongside rising unemployment, while inflation stood at 3.2% in November, its lowest level in eight months. “The base rate cut is good news for aspiring and current homeowners amid the mortgage price war,” she said.

She added that borrowers approaching the end of fixed-rate deals could secure rates in advance. “If you’re hoping to remortgage, you can lock in a fixed-rate deal for up to six months before your current mortgage ends. A qualified mortgage broker can help you find the most competitive deal for your circumstances.”

Ryan McGrath, director of second charge mortgages at Pepper Money, said the decision marked a shift in momentum for borrowers after a prolonged period of financial pressure. “Today’s decision by the Bank of England to cut the base rate marks an important shift in momentum and will be welcomed by borrowers who have been navigating sustained financial pressure over the past two years,” he said.

Read more: FTSE 100 LIVE: Stocks rise as Bank of England cuts interest rates and ECB set to hold

While a 0.25% cut would provide immediate relief for those on tracker mortgages, McGrath warned that many households remained exposed to higher costs when refinancing. “Many homeowners are still locked into low fixed-rate deals secured years ago, meaning a full remortgage could still result in a payment shock,” he said.

He added that this environment continued to support demand for second charge lending. “Secured loans allow homeowners to access equity for home improvements or debt consolidation while keeping their existing mortgage rate intact. As the market adjusts to a lower-rate environment, flexibility and rate preservation will remain key considerations for households reassessing their finances.”

Barclays has reduced pricing on one of its most affordable mortgage deals while other lenders decided to hold rates after cuts the previous week. Here’s more detail on major lenders’ mortgage rates this week:

HSBC (HSBA.L) has a 3.66% rate for a two-year deal, with a £999 booking fee, which remains unchanged from last week. For those with a premier standard account with the lender, this rate is 3.63%.

Looking at the five-year options, the fixed standard rate is 3.88% with a £999 fee, which is also unchanged.

Both cases assume a 60% LTV mortgage, meaning buyers need to have at least 40% for a deposit.

HSBC (HSBA.L) offers 95% LTV deals, meaning you only need to save for a 5% deposit. However, the rates are higher, with a two-year fix at 4.84% or a five-year fix at 4.77%.

This is because their financial situation and deposit size determine the rate someone can get. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky.

The lender this week has moved to sharpen its appeal to first-time buyers, unveiling a cashback offer of up to £2,000 in a bid to ease the upfront costs of entering the housing market.

The bank’s enhanced incentive package, which brokers say could ignite a fresh round of competitive pricing among high-street lenders, marks one of the most generous cashback schemes currently available. The measure is aimed at supporting borrowers struggling with deposit and moving costs at a time when affordability pressures remain high despite a recent easing in mortgage rates.

NatWest’s (NWG.L) two-year deal is 3.62% with a £1,495 product fee, which is unchanged from last week.

The cheapest five-year fixed deal available remains 3.75%, unchanged. In both cases, you’ll need a deposit of at least 40% to qualify for the rates.

Barclays (BARC.L) has a two-year fix available at 3.63% with a £899 product fee, which remains unchanged from the previous week. The five-year deal, however, has dropped to 3.79% from 3.82%.

Barclays (BARC.L) has launched 95% loan-to-value (LTV) mortgages for purchasers of new-build houses, in a move aimed at easing the path to home ownership, especially for those entering the market for the first time.

Read more: Best credit card deals of the week

The new offering applies to new build houses with a maximum purchase price of £600,000. Previously, buyers were required to pay a 10% deposit, meaning a £60,000 deposit on a £600,000 property. Under the new criteria, that requirement could be halved to £30,000.

Earlier in the year, Barclays (BARC.L) launched a mortgage proposition to help new and existing customers access larger loans when purchasing a home.

The initiative, known as Mortgage Boost, enables family members or friends to effectively “boost” the amount that can be borrowed toward a property without needing to lend or gift money directly or provide a larger deposit.

Under the scheme, a borrower’s eligibility for a mortgage can increase significantly by including a family member or friend on the application. For example, Barclays (BARC.L) stated that an individual with a £37,500 annual income and a £30,000 deposit would be able to borrow up to £168,375, meaning the most they could afford would be a home worth £207,375.

However, with Mortgage Boost, the total borrowing potential can increase if a second person, such as a parent, is added to the application. In this case, if the second applicant also earns £37,500 a year, the combined income could push the borrowing limit to £270,000, enabling the buyer to afford a home worth up to £300,000.

Nationwide (NBS.L) has a two-year fix set to come in at 3.83%, unchanged from the previous week. For a five-year deal, the rate remains unchanged at 4.04%. Both deals require a 40% deposit and come with a £999 upfront fee.

Eligible first-time buyers can apply for a mortgage with a minimum annual salary of £30,000, and joint applicants with a combined annual salary of £50,000. This is expected to support an additional 10,000 first-time buyers each year.

Read more: Most popular stocks and funds investors bought in November

The vast majority of Nationwide’s (NBS.L) high loan-to-income (LTI) lending is conducted through its Helping Hand, which enables eligible first-time buyers to borrow up to six times their annual income. This enables borrowing of up to 33% more than the standard lending amount.

The lender also adjusted its mortgage affordability calculation by reducing stress rates in May by between 0.75 and 1.25 percentage points, helping applicants borrow more, whether buying a first home, moving, or remortgaging.

Applicants can borrow, on average, £28,000 more; however, in some remortgage cases, customers may be able to borrow up to £42,600 more.

Halifax, the UK’s largest mortgage lender, offers a two-year fix at 3.82% (also 60% LTV), which remains unchanged from last week.

The lender, owned by Lloyds (LLOY.L), offers a five-year rate of 3.98%, which remains untouched.

It offers a 10-year deal with a mortgage rate of 4.87%.

Santander (BNC.L) withdrew its 60% LTV mortgage products for first-time buyers on borrowing of less than £250,000 on two- and five-year terms on 19 September.

A spokesperson for the bank said that the “change was part of a reprice following the changes to swaps after the Bank of England held interest rates”.

Read more: ‘Bank of mum and dad’ gives second-time homeowners an average of £81,451

Santander (BNC.L) continues to offer products with LTVs of 85% and above for first-time buyers, with the cheapest two-year fix coming in at 4.06% or 4.19% for a five-year deal.

For home movers with a 40% deposit, Santander (BNC.L) is now offering a two-year fixed rate of 3.51% and a five-year deal of 3.72%.

NatWest (NWG.L) is offering the most competitive deals on the market for first-time buyers, with a two-year fixed rate of 3.62% and a five-year fixed rate of 3.75%. However, both require a hefty 40% deposit.

A growing number of homeowners in the UK are opting for mortgage terms of 35 years or longer, with a significant rise in older borrowers stretching their repayment periods well into their 70s.

Meanwhile, Skipton Building Society is allowing first-time buyers to borrow up to 5.5 times their income, helping more borrowers get on the housing ladder.

Leeds Building Society reduced the minimum household income requirement on its first-time-buyer mortgage range. This means single or joint first-time buyer applicants with a household income of £30,000 may now be able to borrow up to 5.5 times their earnings.

Mortgage holders and borrowers have faced higher repayments in recent years, as the BoE’s higher base rate has been passed on by banks and building societies.

Many homeowners will hope the Bank of England continues to cut interest rates. At the same time, savers will likely root for rates to remain at or near their current levels.

Download the Yahoo Finance app, available for Apple and Android.

MORE IN INSIDE CRYPTO

Bitcoin price steadies but fresh fears suggest slide to $52k

Published: Thursday, February 12, 2026 · 10:12 AM

This 1 Quantum Computing Rumor Is Making Investors Sell Their Bitcoin. Don’t Fall for It

Published: Thursday, February 12, 2026 · 9:20 AM