Almost every major lender has cut mortgage rates this week amid a mini-price war, as the Bank of England (BoE) warned that over 3.5 million mortgage holders face significantly higher repayments by 2028.

The average rate for a two-year fixed mortgage stands at 4.75%, while five-year fixed deals average 5.09%, according to data from Uswitch.

The Bank of England has kept interest rates at 4.25% amid inflation fears, delivering a blow to homeowners who were expecting a relief in their mortgage. The primary inflation measure, the Consumer Price Index (CPI), stood at 3.4% in the 12 months to May, a slowdown from the previous month, but well above the BoE’s 2% target.

In its latest Financial Stability Report, the central bank said that roughly 30% of mortgage holders have yet to refix their deals since the BoE began raising rates in late 2021. As those households come to refinance, most will face higher monthly costs, particularly if they initially locked in historically low rates.

These households face a mortgage timebomb, as they confront refinancing in a different interest rate environment. The base rate peaked at 5.25% in August 2023 and remained at that level for a year before the BoE began to gradually cut it, with four successive 25-basis-point cuts over the past 12 months.

The BoE also loosened its lending rules. Until now, just under 10% of new mortgages issued are for valuations exceeding 4.5 times a borrower’s income. That is now set to rise to 15% across the industry, with some building societies and banks now able to offer an even higher number of new mortgages at that level.

Read more: What are branded residences and who’s buying them?

BoE estimates suggest 36,000 extra mortgages with higher loan-to-income ratios could be handed out each year as a result of the change.

This week, HSBC (HSBA.L), NatWest (NWG.L), Santander (BNC.L), Nationwide (NBS.L) and Halifax all reduced rates, going deeper into sub-4% territory for those with a 40% deposit.

HSBC (HSBA.L) has a 3.98% rate for a five-year deal, lower than last week’s 4.01%. For those with a Premier Standard account with the lender, this rate is 3.95%.

Looking at the two-year options, the lowest rate is 3.85% with a £999 fee, a cut from the previous 3.92%.

Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit.

HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. However, the rates are much higher, with a two-year fix at 5.05% or 4.79% for a five-year fix.

This is because their financial situation and deposit size determine the rate someone can get. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky.

NatWest’s (NWG.L) five-year deal is 3.90% with a £1,495 fee, lower than last week’s 3.95%.

The cheapest two-year fixed deal is 3.81%, lower than last week’s 3.88%. In both cases, you’ll need at least a 40% deposit to qualify for the rates.

At Santander (BNC.L), a five-year fix comes in at 3.98% for first-time buyers, lower than last week’s 4.08%. It has a £999 fee, assuming a 40% deposit.

Read more: 3.5 million on track to pay higher mortgages by 2028

For a two-year deal, customers can secure a 3.90% offer, with the same £999 fee, again lower than the previous 4.01%.

Barclays (BARC.L) was the first among major lenders to bring back under-4% deals and currently has a five-year fix at 3.99%, unchanged from last week. For “premier” clients, this rate drops to 3.98%.

The lowest for two-year mortgage deals is 3.89%, the same as before.

Other changes at the lender include:

4.03% two-year fixed £1999 product fee, 70% LTV, min loan £2m, max loan £10m, will decrease to 3.97%

4.14% two-year fixed £1999 product fee, 75% LTV, min loan £2m, max loan £5m, will decrease to 4.05%

Barclays recently launched a mortgage proposition to help new and existing customers access larger loans when purchasing a home. The initiative, known as Mortgage Boost, enables family members or friends to effectively “boost” the amount that can be borrowed toward a property without needing to lend or gift money directly or provide a larger deposit.

Under the scheme, a borrower’s eligibility for a mortgage can increase significantly by including a family member or friend on the application. For example, an individual with a £37,500 annual income and a £30,000 deposit might traditionally be able to borrow up to £168,375, enabling them to purchase a home priced at around £198,375.

However, with Mortgage Boost, the total borrowing potential can rise substantially if a second person, such as a parent, joins the application. In this case, if the second applicant also earns £37,500 a year, the combined income could push the borrowing limit to £270,000, enabling the buyer to afford a home worth up to £300,000.

Nationwide’s (NBS.L) lowest mortgage rate for first-time buyers is 4.08% for a five-year fix, which is slightly lower than the previous 4.09%.

First-time buyers are currently looking at 3.81% for a two-year fix, again lower than last week’s 3.94%. Both deals require a 40% deposit and a £1,499 fee.

Other changes for first-time buyers include reductions of up to 0.11% across two, and five-year fixed rate products up to 90% LTV, namely:

Two-year fixed rate at 85% LTV with a £1,499 fee1 is 4.13% (reduced by 0.06%)

Five-year fixed rate at 85% LTV with a £999 fee is 4.19% (reduced by 0.10%)

Five-year fixed rate at 90% LTV with no fee is 4.49% (reduced by 0.10%)

Read more: Best credit card deals of the week

Carlo Pileggi, Nationwide’s senior manager, mortgages, said: “We’re making further cuts across selected products from our fixed mortgage range to ensure that Nationwide continues to be front of mind for those looking to buy their first home, move to their next or who want to switch to a new deal. These latest cuts will particularly help first-time buyers and our existing members switching to new deals.”

The lender has adjusted its mortgage affordability calculation by reducing stress rates by 0.75 and 1.25 percentage points, helping applicants borrow more, whether buying a first home, moving, or remortgaging.

Applicants can borrow, on average, £28,000 more; however, in some remortgage cases, customers could borrow up to £42,600 more.

Nationwide also reduced its standard stress rate and the rate applied to eligible first-time buyers and home movers fixing their deal for at least five years.

Halifax, the UK’s biggest mortgage lender, offers a five-year rate of 3.97% (also 60% LTV), lower than last week’s 4.02%.

The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate deal at 3.84%, with a £999 fee for first-time buyers, lower than the previous 3.94%.

It also offers a 10-year deal with a mortgage rate of 4.78%.

Read more: UK house prices stagnated in June as market struggles to regain momentum

Halifax has enhanced its five-year fixed mortgage products by increasing borrowing capacity. This improvement allows borrowers to access up to £38,000 more, enabling them to secure larger mortgages based on individual incomes.

Rachel Springall, finance expert at Moneyfacts, said: “The flourishing choice of low-deposit mortgages will no doubt be welcomed by borrowers looking to remortgage or are a first-time buyer.

“The government has been clear that it wants lenders to do more to boost UK growth, and so a rise in product availability for aspiring homeowners is a healthy step in the right direction.”

HSBC and Nationwide currently offer some of the lowest rates on the market, with a two-year fix coming in at 3.81%. Halifax takes the crown for a five-year fix with its 3.97% deal. However both require a hefty 40% deposit.

The average UK house price is £297,781, so a 40% deposit equals about £120,000.

A growing number of homeowners in the UK are opting for 35-year or longer mortgage terms, with a significant rise in older borrowers stretching their repayment periods well into their 70s.

Read more: UK house prices expected to rise but market continues to face uncertainty

Lender April Mortgages offers buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, from a deposit of 5%. Both those buying alone and those buying with others can apply for the mortgage.

As part of the independent Dutch asset manager DMFCO, the company offers interest rates starting at 5.20% and an application fee of £195.

Skipton Building Society has also said it would allow first-time buyers to borrow up to 5.5 times their income to help more borrowers get on the housing ladder.

Leeds Building Society is increasing the maximum amount that first-time buyers can potentially borrow as a multiple of their earnings with the launch of a new mortgage range. Aspiring homeowners with a minimum household income of £40,000 may now be able to borrow up to 5.5 times their earnings.

Mortgage holders and borrowers have faced record-high repayments in recent years, as the Bank of England’s base rate has been passed on by banks and building societies.

According to UK Finance, 1.3 million fixed mortgage deals are set to end in 2025. Many homeowners will hope the Bank of England acts quickly to cut rates more aggressively. At the same time, savers will likely root for rates to remain at or near their current levels.

Read more:

Download the Yahoo Finance app, available for Apple and Android.