Best mortgage rates and how to find them

Secure the best deal on one of life's biggest financial investments with these best mortgage rates
  • We earn a commission for products purchased through some links in this article.
  • Are you looking for the best mortgage rates? Speculation that the Bank of England could soon start to increase interest rates to curb inflation has prompted some of the UK’s biggest lenders to hike the cost of their mortgage deals.

    So, now is the time to look out for mortgage best buys: switching to a cheap mortgage could save you thousands of pounds a year, particularly if your current deal is coming to an end. Otherwise, you’ll soon be paying your lender’s standard – and probably higher – variable rate.

    Despite the recent flurry of rate increases, if you have a 40% deposit you can still get your hands on an interest rate of less than 1%, according to Moneyfacts. A borrower with a £250,000 mortgage over 25 years switching from the average standard variable rate of 4.41% to a two-year fixed rate of 0.99% could save £436 a month and £10,464 over two years.

    Mortgage lenders are using interest rates to manage their demand. What that means is that if they come out with a deal with great mortgage rate, it probably won’t hang around for long. And some banks and building societies are quite picky about who gets their best rates. But, whatever your situation, there are steps you can take to improve your chances of getting a great deal.


    Best mortgage rates December 2021

    Best two-year fixed rate mortgages

    Lender Deal rate Deal Fee Max LTV Early Repayment Charge? Notes
    Barclays 1.49% 2yr fix £0 60% Yes Free valuation & £250 cashback
    Newcastle Building Society 2.75% 2yr fix £0 95% Yes Free valuation & £500 cashback

    Best five-year fixed rate mortgages

    Lender Deal rate Deal Fee Max LTV Early Repayment Charge? Notes
    TSB 1.59% 5yr fix £201 60% Yes Free valuation & £500 cashback
    Yorkshire Building Society 3.00% 5yr fix £299 95% Yes Free valuation

    Best 10-year fixed rate mortgages

    Lender Deal rate Deal Fee Max LTV Early Repayment Charge? Notes
    Virgin Money 3.89% 10yr fix £995 90% Yes Free valuation
    Barclays 1.65% 10yr fix £999 95% Yes £250 cashback

    Best first-time-buyer mortgages

    Lender Deal rate Deal Fee Max LTV Early Repayment Charge? Notes
    Skipton Building Society 2.85% 2yr fix £495 95% Yes Free valuation & £500 cashback
    TSB 1.69% 2yr fix £0 60% Yes Free valuation & £500 cashback

    Best buy-to-let mortgage

    Lender Deal rate Deal Fee Max LTV Early Repayment Charge? Notes
    HSBC 1.69% 2yr fixed £0 60% Yes Free valuation and arrangement fees
    Principality Building Society 1.60% 2yr variable £0 60% Yes Free valuation. Low 1% early repayment charge

    Source: London & Country mortgage brokers

    best mortgage rates

    Image credit: Katie Lee

    How do I find the best mortgage rate?

    If you’re thinking of buying a property or remortgaging, a good starting point is to get a feel for the mortgage rates on offer. That means looking at some mortgage brokers’ websites and at price comparison sites. Check out what your own mortgage lender or bank is offering as well, as some have better deals for existing borrowers or customers who bank with them.

    High-street lenders can be competitive, but they’re not the only option if you’re looking for a mortgage. Small building societies can sometimes be more understanding and flexible if your situation isn’t straightforward, such as if you’ve recently swapped jobs or are self-employed. And there are some digital and mobile-only banks that also offer mortgages.

    To get the very best rates, theres are your main options:

    1. Use a traditional mortgage broker

    A mortgage broker is qualified to give you advice on the best mortgage rates. They’ll get to know your circumstances and find out what your plans are for the future before recommending the best deal.

    They operate independently from banks and building societies. But not all brokers search the entire mortgage market. Some only recommend mortgage deals from a limited selection of lenders. If you’re using a broker, ask them how they operate before going ahead.

    Mortgage brokers will have access to exclusive mortgage deals that you wouldn’t be able to ask your bank for. There are also some lenders that only deal with mortgage brokers because they don’t have any branches.

    That said, from time-to-time mortgage lenders keep back their best mortgage deals and offer them to borrowers directly, so it is worth doing some shopping around of your own via a price comparison site.

    Using a broker could add an extra cost to your mortgage bill. All mortgage brokers receive a payment from the mortgage lender they recommend, but some also charge a fee for their services on top. This can be up to 1% of your mortgage balance but often it is a flat fee.

    2. Find an online mortgage brokers

    If you prefer to sort out your finances over the internet, you can use an online mortgage broker such as Trussle, Habito or Mojo Mortgages instead. The face-to-face meeting is replaced with an online application form and once you’ve submitted your personal details you’ll receive a mortgage recommendation.

    Both Trussle and Habito use computer algorithms to search through thousands of deals for you, while also providing a human adviser to talk through recommendations. Mojo uses a human adviser to search more than 10,000 rates.

    Online brokers are quick and convenient. You apply for a mortgage at a time that suits you and you still get to speak to real-life adviser once you’ve received your recommendation. You don’t have to wait for paperwork to be posted and you can track you mortgage application online. But without an adviser to help you fill out the application, you could make a mistake which may go undetected for weeks and eventually lead to a rejection or delays.

    3. Renegotiate with your current lender

    If you’re looking for a new mortgage deal without any extra borrowing, speaking to your current mortgage lender is a quick way to switch rates. Your earnings and credit report will not be rechecked if don’t increase your mortgage balance or change the term.

    You’ll receive a letter from your lender three to six months before your current rate expires telling you the new deals the bank can offer you. When your existing mortgage deal ends, you’ll then be automatically transferred to the one you’ve chosen. Some lenders will even let you switch before your deal has expired if the new deal is cheaper.

    But be warned: just because your bank is being helpful, it doesn’t mean it is offering you the best mortgage deal on the market. You’re also not receiving personalised mortgage advice.

    4. Use price comparison websites

    Price comparison websites are a good place to start your search by giving you an overview of the best rates on the market Popular comparison websites include; Go Compare, Compare The Market and

    David Hollingworth, associate director of broker L&C Mortgages, says: “Best buy tables on price comparison websites are an easy way to find the lowest rates but they may not be the cheapest deals. Look at the fees associated with the mortgage and whether the deal comes with a free valuation or legal work.

    “There are thousands of mortgage deals and lots of them look similar but have different criteria you may not meet which you might not find out until you’ve completed a full mortgage application.”

    Check the Annual Percentage Rate of Charge (APRC) to compare the truest cost of mortgage deals.

    best mortgage rates

    Image credit: Colin Poole

    How to prepare your finances for a new mortgage

    Once you’ve got an idea of what’s on offer, start your preparation so your finances are in the best shape when you actually apply for your mortgage. Don’t leave this until the last minute. Check your credit rating a few months before by applying for a copy of your credit report, so you can take steps to improve your credit score for a mortgage.

    You should do this at the three main credit reference agencies; Equifax, Experian and TransUnion (its consumer brand, Noddle, provides credit reports for free). You can apply for a copy of your report online. It will cost £2 with the other two agencies every time you apply, but you may be able to get your report for free through the regular promotions they run.

    The reason why it makes sense to apply for your credit report in advance is that if there’s a mistake, you have time to get it corrected. And if your credit report shows late or missed payments, you can add what’s called a ‘notice of correction’. This a short explanation of why you missed the payment. A mortgage lender would have to look at this explanation before it makes a decision about whether or not to lend to you.

    If you’re not on the electoral register, sign up for it. Mortgage lenders use it to verify that you are who you say you are, and it will affect your credit rating if you’re not registered. You can do this at Register to Vote.

    If you’re normally overdrawn, reduce or pay off your overdraft. Mortgage lenders will be nervous if your overdraft is increasing month by month or is sizeable. You don’t have to be debt free, but banks will take any debt you already have (such as loans and credit cards) into account when working out how much to lend.

    Working out how much to borrow

    best mortgage rates

    Image credit: TI-Media

    Although mortgage rates for particular deals vary from lender to lender, they all tend to charge a higher rate the more you want to borrow in relation to the value of the property (called the Loan To Value, or LTV).

    Mortgage lenders tend to work to similar thresholds, with mortgage rates typically rising for every extra five per cent you want to borrow. So, if you can keep your borrowing at, say, 80 per cent rather than 82 per cent, your mortgage rate should be a bit cheaper.

    What type of mortgage rate should I go for?

    There are lots of different types of mortgage rates, and it’s not always clear exactly how they work.

    • Fixed rates are the most straightforward – they do what they say on the tin. The mortgage rate can’t go up or down during the term of the fix, which is typically between two and ten years. They’re great if you need certainty but they normally come with an early repayment charge if you need to pay the mortgage off before the term ends. It’s not a problem if you’re moving home and you can take your mortgage with you.
    • Tracker or variable rates track the Bank of England base interest rate. When the Bank of England rate goes down, the tracker rate immediately falls by the same amount and vice versa when the rate rises. Different mortgage lenders will charge a different premium on their tracker rate. This is the difference between the Bank of England base rate and the rate you’re charged. At time of writing, some best buy tracker rates charge between 0.65 and 0.75 per cent above the base rate.
    • Discount mortgages are a different type of variable rate. Here, instead of paying a premium above the Bank of England Rate, you get a discount off the lender’s standard variable rate (SVR). Unlike tracker rates, mortgage lenders don’t have to increase or reduce the discount rate when the Bank of England changes its interest rate. If they do, they don’t have to change the discount rate by the same amount.

    When your mortgage rate runs out, you’ll go onto your lender’s standard variable rate unless you switch to another deal. Always check what the Standard Variable Rate is before you choose a mortgage deal. They vary by over two per cent between lenders and, if your circumstances were to change and you couldn’t qualify for a great rate, you want to know you’re not being hammered by the SVR.

    If you’re confident in finding the best deal, you can sort it out yourself. Bear in mind that finding the cheapest rate is easy, but finding the best mortgage is less straightforward.

    What is an overall cost for comparison?

    When you’re looking at mortgage deals, you’ll see the phrase ‘overall cost for comparison’ or APRC (annual percentage rate of change) next to an interest rate. This is a standardised figure, provided by the lender, to show overall interest rate for the duration of the deal. It includes the cost of the mortgage, plus any fees and charges that you have to pay.

    It’s a useful figure because it helps you compare deals that may look similar on the surface (e.g. same headline rate) but work out rather differently when all the costs are taken into account.

    What is a good interest rate for a mortgage?

    Two per cent is the benchmark you should be aiming for, according to Peter Gettins of London and Country mortgage brokers. He says that there are lenders offering this rate on a range of products, from five-year fixed rates (if you want to borrow up to 75 per cent of the property’s value) to fee-free two-year fixes on 90 per cent loan-to-value. You can even get a seven-year fixed rate at just under two per cent.

    Can you negotiate a better rate for a mortgage?

    You can’t haggle the rate down like you can with home insurance. But if you haven’t reviewed your mortgage deal in a while, and especially if you’re on the standard variable rate, there’s a very good chance you can get something better, says London and Country’s Peter Gettins.

    ‘Lenders are increasingly pretty good at looking after their existing customers,’ he says, ‘and frequently offer them the same rates as new customers – sometimes even better.’

    Reserving the best rates

    You should plan your mortgage switch three to six months before your current deal expires. Mortgage rates change rapidly depending on the economy. When you apply for a new deal, you are reserving that rate. So even if the lender withdraws it before you have completed the switch the rate is still yours.

    Once you’ve been approved for the mortgage you’ll receive a formal mortgage offer which is valid for between three to six months so you can hang on to your rate long after it has been withdrawn.

    What’s the best time period for a fixed-rate mortgage?

    How long your fixed rate mortgage lasts for depends entirely on your own circumstances and budget. ‘A family with small children in an area with good schools who have no plans to move may well look for a five or even ten-year fixed rate,’ says Jane King of Ash-Ridge Private Finance. ‘A young, single person who wants to move for their career, might want the flexibility of a much shorter fixed rate.’

    If you compare a two-year fixed rate and a five-year one, with the same fees and charges, the fees on the two-year mortgage will work out more expensive on a ‘per year’ basis. It sounds obvious, but it’s easy to focus on the headline interest rate, which will be lower on a two-year fixed rate deal.

    While there are lots of two and five-year fixed rate mortgages, there aren’t so many mortgage lenders offering them for ten years or more.

    Check the early repayment charge, especially if you’re choosing a longer fixed rate. It’s typically a percentage that reduces over time and it varies widely between lenders – and fixed rate mortgage deals.

    best mortgage rates

    Image credit: Lizzie Orme

    Will mortgage rates go up or down?

    It’s always hard to predict whether mortgage rates will rise or fall and with the current political situation, it’s even harder.

    But Jane King, a mortgage adviser with Ash-Ridge Private Finance thinks rates are unlikely to fall: ‘The general consensus is that fixed rates cannot go much lower as lenders would be unable to make a reasonable profit margin. Tracker rates are forced to follow Bank of England base rates and again, there is little room for these to reduce much further.’

    Fees and mortgage rates

    It’s not just the mortgage rate itself you need to take into account, but the fees charged by the lender. Most lenders charge an arrangement fee (which is often around £1,000 – or even more). There may be a booking fee, although these are less common. Some lenders offer two versions of their mortgage deals; one with a fee and one that’s fee free. If you have a smaller mortgage, it’s worth comparing the fee-free option.

    You’ll normally have to pay a valuation fee and legal fees as well, although the lender may make a contribution towards these.

    What are exit fees?

    In most cases, you’re tied into your current mortgage deal for a set period usually matching the term of your interest rate. For example, you would be tied into your two-year fixed rate for two years. If you want to leave before the end of the two years you must pay an exit fee also known as an early repayment charge.

    The charge is calculated as a percentage of your mortgage balance ranging from 5% to 1% depending on the deal. If you can get a big enough saving by switching mortgage, it may be worth paying these fees, but do your sums carefully – and consider waiting until your current deal ends.

    With a little preparation and either the help of a professional mortgage broker, or some research, you should be able to find a great mortgage deal.

    All the latest from Ideal Home