We use cookies to allow us and selected partners to improve your experience and our advertising. By continuing to browse you consent to our use of cookies. You can understand more and change your cookies preferences here.

The cheapest mortgage deals revealed as the base rate rises to 0.25%

The mortgage rate war is over but borrowers can still get a low-cost deal

The cheapest mortgage deals revealed as the base rate rises to 0.25%

Mortgage rates are continuing to rise slowly, a month on from the Bank of England increasing the base rate to 0.25%.

Borrowers with big deposits have seen the cheapest mortgage rates rise from historic lows of 0.79% to more than 1% in the last few months, as lenders prepared for an upcoming increase in the base rate.

Now that’s come to pass, Which? takes a look at the best deals on the market and offers advice on what you’ll need to think about before settling on a mortgage deal.

Base rate hike ends mortgage rate war

Last month, the Bank of England increased the base rate from its historic low of 0.1% to 0.25% in response to soaring inflation.

The base rate dictates the cost of borrowing for banks and building societies, so a higher rate usually means more expensive borrowing for consumers.

So far, the rise hasn’t had a seismic effect on the cost of fixed-rate mortgages, as banks had already been raising their prices in preparation.

The base rate change marked the definitive end of the mortgage rate war, which began last May when TSB launched the first sub-1% fixed-rate mortgage seen since 2017.

By October, two-year fixed-rate deals had fallen to as low as 0.79% and more than 100 sub-1% deals were available.

How do rates compare for borrowers with big and small deposits?

Even the cheapest two-year fixed-rate deals are now priced above 1%, and no nationally-available sub-1% mortgages remain.

A handful of cheaper deals are still available, but they come with geographical restrictions, for example only being available in Northern Ireland.

The table below shows the lowest rates currently available on two-year and five-year fixes.

Loan-to-value Cheapest two-year fix Cheapest five-year fix
60% 1.11% (Barclays) 1.36% (Platform)
75% 1.22% (Accord) 1.46% (Platform/Chelsea Building Society*)
90% 1.61% (Platform)* 2.16% (Platform)
95% 2.36% (Yorkshire Building Society)* 2.79% (Yorkshire Building Society)*

Source: Moneyfacts 11 January 2022. *Available for home buyers only. 

Best rates at 60% loan-to-value

If you’re borrowing at 60% loan-to-value, you should be able to get a two or five-year fixed-rate deal with an initial rate between 1.1-1.4%.

The tables below show the best rates currently available for people buying a home and remortgaging respectively, using figures from Moneyfacts.

Cheapest rates for homebuyers

Two-year fix

Lender Initial rate Revert rate Upfront fee
Barclays 1.11% 3.74% £999
Nationwide 1.24% 3.74% £1,499
Santander 1.24% 3.35% £999

Best rate with no upfront fee: 1.39% from Barclays

Five-year fix

Lender Initial rate Revert rate Upfront fee
Platform 1.36% 4.49% £1,999
Nationwide 1.39% 3.74% £1,499
HSBC 1.41% 3.54% £1,499

Best rate with no upfront fee: 1.62% from Halifax

Cheapest rates for remortgaging

Two-year fix

Lender Initial rate Revert rate Upfront fee
Barclays 1.11% 3.74% £999
NatWest 1.17% 3.59% £995
Accord 1.18% 4.49% £1,495

Best rate with no upfront fee: 1.49% from Nationwide

Five-year fix

Lender Initial rate Revert rate Upfront fee
Platform 1.36% 4.49% £1,999
Nationwide 1.39% 3.74% £999
Chelsea Building Society 1.41% 4.49% £1,495

Best rate without an upfront fee: 1.63% from NatWest

Does a lower rate mean a cheaper deal?

The cheapest rates are bound to be tempting, but you’ll need to take the full cost of the mortgage into account before rushing in.

That’s because lenders are now charging upfront fees as high as £1,999 on their table-topping deals. Higher fees allow lenders to offer lower rates and recoup their losses elsewhere.

Above, we’ve listed the best rates available with no upfront fees. As you can see, you might need to pay a premium of around 0.25-0.4% for a fee-free deal, but in some cases a ‘more expensive’ mortgage might actually be cheaper over the fixed term.

If you’re unsure about which type of deal to go for, a mortgage adviser will be able to analyse deals based on their true cost, taking into account rates, fees and incentives.

The Which? Money Podcast

Will mortgage rates continue to rise?

The cost of fixed-rate mortgages is rising relatively slowly, with data from Moneyfacts showing the average two-year fix has increased by 0.04% in the last month.

The good news for borrowers is that prices fell so far in 2021 that they’re increasing from a very low base, so there are still lots of attractive deals available, regardless of the size of your deposit.

Variable rate deals, such as trackers and discount mortgages, were immediately affected by last month’s base rate rise, so borrowers with these mortgages may be best moving to a fixed-term deal when they come to remortgage.

With inflation unlikely to fall anytime soon, the Bank of England could decide to increase the base rate further when it next meets at the start of February, so if you’re thinking of locking in a new mortgage deal, sooner might be better than later.

How long should you fix your mortgage rate for?

One of the biggest questions when it comes to mortgages is how long to lock in your rate for.

Borrowers most commonly fix for either two or five years. Five-year deals were once significantly more expensive, but the gap has closed in recent years. With this in mind, many borrowers have chosen to fix for longer to protect themselves from rate increases.

This is a good idea in theory, but it’s not the right move for everyone.

Five-year fixes usually come with high early repayment charges, meaning that you could be charged thousands of pounds if you decide to pay the mortgage back early (for example, if you move home and don’t transfer it to the new property).

With this in mind, it’s important to think of your own medium and long-term plans before settling on a mortgage term.

This story was originally published on 6 September 2021. It is regularly updated with the latest mortgage rates. The last update was on 11 January 2022.

Back to top
Back to top