A shift is taking place across the mortgage market, bringing a wave of opportunity for both prospective buyers and existing homeowners. Leading lenders are responding to expectations of falling interest rates by reducing mortgage pricing and easing affordability criteria. This development could enhance borrowing potential for many households in the months ahead.
Leading Lenders Reduce Mortgage Rates
Several major lenders, including Barclays, TSB, HSBC, Coventry Building Society and the Co-operative Bank, have recently announced reductions to their fixed-rate mortgage products. Barclays has been among the first FTSE 100 banks to offer two-year and five-year fixed deals starting from 3.99 per cent1.
HSBC has followed suit with a broad range of reductions across its residential and buy-to-let offerings, including five-year fixed rates falling below four per cent. Industry analysts suggest this trend signals increased competition in the market, with further reductions likely as other lenders seek to remain competitive1.
According to data from Rightmove, the average two-year fixed rate has decreased by 0.42 percentage points over the past year, now sitting at 4.81 per cent. Five-year fixed rates have also seen a reduction, down 0.13 percentage points to 4.70 per cent1.
Increased Borrowing Potential
In addition to rate cuts, lending criteria are being revised to improve access to borrowing. Lloyds Banking Group, which includes Halifax, Bank of Scotland and BM Solutions, has adjusted its affordability calculations. This change could allow the average borrower to access approximately £38,000 more on their mortgage, equating to an increase of up to 13 per cent in maximum borrowing for some applicants1.
These adjustments have primarily affected stress testing rates, which assess whether borrowers could afford repayments if interest rates were to rise. For five-year fixed rate products, the stress test threshold has been lowered, making affordability calculations more favourable for applicants.
Similar changes have been made by Santander, which recently reduced its stress test rates by up to 0.75 percentage points, making them the lowest since 2022. These updates are particularly significant for first-time buyers and home movers who previously struggled to meet stringent affordability requirements2.
Remortgaging Activity Increases
The Bank of England’s latest Credit Conditions Survey reports a notable rise in remortgaging activity, with homeowners reacting swiftly to falling rates. As fixed-rate deals expire and new, more competitive options become available, a surge in remortgage applications is anticipated over the coming months3.
This trend reflects a growing confidence in the mortgage market, driven in part by expectations that the Bank of England will cut the base rate later this year. Currently held at 4.5 per cent, the base rate remains below its 2023 peak of 5.25 per cent. Market consensus suggests that multiple cuts may take place in 2025, potentially improving conditions further for borrowers4.
A More Flexible Lending Environment
The Financial Conduct Authority has also acknowledged that mortgage stress testing may have been applied too cautiously in recent years. The regulator has indicated a willingness to review current rules in order to support greater access to home ownership, while maintaining prudent lending standards.
This policy backdrop, combined with lender-driven initiatives, suggests a more flexible and borrower-friendly environment is emerging. While broader economic uncertainties remain, improved mortgage availability and more accessible rates are welcome developments for anyone looking to purchase, remortgage or move home.
What This Means for You
For buyers, the increased supply of mortgage products and eased affordability checks could significantly expand borrowing options. For existing homeowners, now may be an opportune time to review existing mortgage arrangements and consider securing a new deal.
If you would like to explore how these changes might affect your borrowing potential or discuss whether it is the right time to remortgage, please get in touch to arrange a consultation.
References:
- City AM (2025). HSBC, Barclays, Lloyds: Lenders bank on interest rate cut as mortgage ‘price war’ heats up. Available at: https://www.cityam.com/hsbc-barclays-lloyds-lenders-loosen-up-as-mortgage-price-war-heats-up/ [Accessed 23 Apr. 2025].
- Santander (2025). Santander becomes first lender to reduce mortgage affordability rates to enable customers to borrow more Available at: https://www.santander.co.uk/about-santander/media-centre/press-releases/santander-becomes-first-lender-to-reduce-mortgage? [Accessed 23 Apr. 2025].
- Bank of England (2025). Credit Conditions Survey – 2025 Q1.Available at: https://www.bankofengland.co.uk/credit-conditions-survey/2025/2025-q1 [Accessed 23 Apr. 2025].
- Euro News. (2025). UK inflation falls more than expected boosting rate cut chances. Available at:https://www.euronews.com/business/2025/04/16/uk-inflation-falls-more-than-expected-boosting-rate-cut-chances [Accessed 28 Apr. 2025].
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