Mortgage price war heats up as rates fall below 4%: homebuyers urged to act fast

A mortgage price war has erupted among major UK lenders, with Santander, Barclays, and Nationwide all launching deals below 4% for the first time since November.

The rate cuts come as the Bank of England’s recent decision to lower the base rate to 4.5% fuels competition among lenders as more people look to secure cheaper mortgages when buying a house.

However, experts caution that global economic uncertainty and upcoming inflation data could influence how long these deals will remain available.

Sub 4% mortgage rates return

Santander has led the charge, cutting rates to 3.99% for both two-year and five-year fixed mortgages. Barclays and Nationwide have followed suit, offering competitive deals in a bid to attract homebuyers and those remortgaging.

The return of these lower mortgage rates is largely driven by the Bank of England’s recent 0.5 percentage point cut to the base rate, which now stands at 4.5%. This move has encouraged lenders to pass savings on to borrowers, with swap rates - a key indicator of future mortgage pricing - also falling.

These reductions come as good news for borrowers, especially as the average two-year fixed mortgage rate currently sits at 5.48%, with five-year fixes averaging 5.29%, according to Moneyfacts data.

Spring surge in mortgage demand

The rate war coincides with growing signs of renewed momentum in the housing market. According to Rightmove, the number of people applying for a mortgage in principle hit a record high in January 2025, marking a 49% increase compared to the same period last year.

Rightmove’s Colleen Babcock highlighted that the return of lower mortgage rates, combined with buyers rushing to beat the stamp duty deadline, has driven market activity.

“For those in higher-priced areas of England like London, the additional stamp duty charges can be significant and difficult to afford when already stretched to the max,” Babcock said. “The lengthy and frustrating completion process means that the average mover has had to have one eye on the clock since November to ensure that they complete before the stamp duty deadline. Beyond the deadline, agents report that underlying market activity remains positive, and that they don’t expect a major drop-off in activity from April.”

Colleen Babcock

Colleen provides expert insight into RIghtmove data on mortgages, house buying and market trends and has a over a decade of experience in the real estate market.

Should borrowers lock in now?

Mortgage brokers are urging borrowers to move quickly before rates rise again.

“We’ve now had the first Bank Rate cut of the year, and current forecasts suggest there are still two or potentially three more cuts to come, which could see us closing out the year with a Base Rate of 4% or lower,” said a mortgage expert from Trinity Financial.

“The response from the market has been positive, and mortgage rates have trickled downwards since the announcement. We hope this is the beginning of a sustained period of rates slowly heading downwards, and while we’re unlikely to see major falls across the board, we’ve already seen the first sub-4% rates of 2025.”

However, with global economic uncertainty and potential shifts in inflation and earnings data, there is no guarantee these deals and we could see a return to mortgage rate increases in the near future meaning now could be the best time to buy a house.