A growing number of banks and lenders are now offering fixed-rate mortgage deals below 4%, a sign that the tide may be turning for homebuyers and remortgages alike.
In fact, the number of mortgage products with interest rates below 4% doubled between January and April 2024, according to Moneyfacts.
But what’s behind this new push, and what does it mean for borrowers?
Why Are Mortgage Rates Dropping Below 4%?
Several factors, including inflation, are driving mortgage rates to drop below 4%. One is falling inflation; After peaking at over 11% in 2022, the UK's inflation rate has slowed to under 4% in early 2025. This has eased the pressure on the Bank of England to maintain higher base rates, allowing lenders to cut rates without eroding their margins.
David Beard of money price comparison, Lending Expert explains:
“This is part of a growing trend among lenders keen to do more business. Falling fixed-rate mortgages and reversion rates for borrowers coming to the end of their current deal points to a lower rate environment. The easing of the cost-of-living crisis and inflation is playing a part, along with the Financial Conduct Authority clarifying its stance on affordability stress rates.”
In short, lenders are regaining confidence and becoming more competitive, which is good news for buyers.
What Types of Mortgages Are Being Offered Below 4%?
Most of the sub-4% deals are appearing in the 2- and 5-year fixed-rate categories, particularly for borrowers with good credit scores and significant equity.
A recent report by Uswitch shows that 5-year fixed mortgage rates dropped from an average of 5.34% in late 2023 to just 3.96% by April 2024 for certain products.
While variable and tracker rates remain higher in many cases, the fixed-rate market is heating up. Banks like HSBC, NatWest, and Virgin Money are leading the charge, often targeting borrowers nearing the end of their current deals.
What Does Reduced Mortgage Rates Mean For First-Time Buyers and Remortgages?
For first-time buyers, reduced mortgage rates could mean the difference between being priced out and getting on the ladder. Monthly repayments are more manageable, and lenders may be more open to applications with slightly smaller deposits.
For those remortgaging, the timing couldn’t be better. Securing a new fixed deal now can prevent a sudden jump to higher standard variable rates.
The drop in affordability stress testing — a result of the FCA’s recent clarification — also means borrowers may find it easier to qualify than they did just a year ago.