Best mortgage rates – January 2022

Last month, the Bank of England raised the base rate meaning monthly mortgage payments will increase for many homeowners. So it's essential to check you're on the best mortgage deal. Read on for the best rates, including fees, best remortgaging deals, and more.

Finding the best mortgage rates in a sea of mortgage deals is hard work. So every month we’ll be showcasing the best deals for you, with input from the mortgage experts at L&C.

What the interest rate rise means for you

On 16 December the Bank of England raised the base rate from 0.1% to 0.25% – the first increase in more than three years. If you have a tracker mortgage, the rate rise means your mortgage payments will have increased.

However if you’re one of the 1.1 million households on a Standard Variable Rate, it’s less straight forward as these can change at the lender’s discretion. The lender can pass on the full increase, some of it, or none. And if it wanted to, your lender could increase rates by more. So if you’re not sure how if your rate has increased it’s important to check.

If you’re on a fixed rate mortgage you will only see a change in your repayments when your fixed term ends.

Read more about how to protect yourself from a mortgage rate rise in our guide.

Best mortgage rates for January

In the last few months of 2021 we saw mortgage rates creeping up amid the speculation of a base rate rise. But while many lenders were quick to increase their rates as soon as the increase was announced, the impact of the base rate rise on the best deals available has been mixed. While some of the cheapest deals have been pulled, other deals are now available that are lower than last month.

Best 2 year fixed rate mortgage

If you’re looking for a 2 year fix, Halifax offers the lowest rate at 1.11%. You’ll pay a £999 arrangement fee and you’ll need at least a 40% deposit. It’s available for both remortgaging and for purchases. This is a slight increase on the 1.10% Halifax offered last month, which was only available if you were purchasing a property.

And the new Halifax deal is offered at a lower rate than last month’s best 2 year fix for remortgages, which was offered by Yorkshire Building Society at 1.12%. This is still available; you’ll need a 25% deposit and it has an arrangement fee of £1,495. It’s available on purchases too.

Best 3 year fixed rate mortgage

The lowest rate on a 3 year fix remains with Nationwide which still offers a rate of 1.24%. You’ll need a 40% deposit and there’s an arrangement fee of £999 and it’s only available if you’re purchasing a home. However if you’re remortgaging, Barclays offers a rate of 1.30%, you’ll need a 40% deposit plus it has an arrangement fee of £999 and you’ll get £250 cashback. This is a lower rate than last month’s cheapest rate on a 3 year fix if you were remortgaging which was from Nationwide at 1.34%. This is still available: you’ll need a 40% deposit and there’s a £999 arrangement fee and you’ll get £500 cashback.

Best 5 year fixed rate mortgage

For a 5 year fix, Barclays offers the lowest rate at 1.33%. You’ll need a deposit of at least 45% and it has an arrangement fee of £749. However, it’s only available if you’re buying a house.

This compares to the best 5 year fix available last month which was from Halifax at 1.31%. It required a deposit of at least 40% and had an arrangement fee of £995. It was also only available if you were buying a house.

If you’re remortgaging and looking for a 5 year fix, last month the best rate on offer as from Santander at 1.34%. You would have needed a 40% deposit and paid arrangement fee of £999. However, the best rate available this month for a 5 year fix if you’re remortgaging is from Yorkshire Building Society at 1.39%. You’ll pay an arrangement fee of £1495 and need a deposit of at least 25%.

Best variable rate mortgages

If you would prefer to take out a variable deal, and you’re purchasing, the best rate this month remains Base + 0.74% for 2 years, which means this rate currently stands at 0.99%. However, the lender offering this rate has changed and it’s now Nationwide offering this deal. You’ll need a 40% deposit and it has an arrangement fee of £999.

For those remortgaging, the best deal is from Barclays at Base + 0.75% for 2 years, which means it’s currently 1.00%. You’ll need a 40% deposit and it has an arrangement fee of £999. The best remortgaging rate available last month was with NatWest, which offered the 2 year Base + 0.72% deal. It required a 25% deposit and came with a £1,495 arrangement fee.

However, while these rates are more favourable than those offered on fixed rates, bear in mind that the amount you will pay each month will increase if the base rate rises again.

Get fee-free mortgage advice from our partners at L&C. Start online or give them a call today about your mortgage needs

First time buyer sales highest for 19 years

The number of first time buyers in the UK has hit its highest level since 2002, according to Yorkshire Building Society. It estimates the number of buyers who got on the property ladder in 2021 to be 408,300. This would be a 35% increase on the 303,000 transactions in 2020.

Falling unemployment, low borrowing costs and an increased number of low deposit mortgage deals are key drivers of current demand, Yorkshire Building Society said.

Planning to buy your first home and want to find out about mortgages? Read everything you need to know in our First Time Buyer Mortgages guide.

Browse mortgage rates

Take a look at today’s best rates from lenders and get an overview of mortgage options now.

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Your home or property may be repossessed if you do not keep up the repayments on your mortgage.

Representative example A mortgage of £204,302 payable over 23 years, initially on a fixed rate until 31/12/24 at 1.56% and then on a variable rate of 5.05% for the remaining 18 years would require 62 payments of £881.42 and 214 payments of £1,168.08. The total amount payable would be £305,690 made up of the loan amount plus interest (£100,315) and fees (£1,073). The overall cost for comparison is 3.6% APRC representative.

Is now a good time to remortgage?

While we have seen some of the cheapest mortgage deals disappear from the market over the last few months, there are still some excellent rates available. But if you want to remortgage, you should act quickly to grab deals before they disappear.

If you’re on a SVR, locking into to a fixed rate not only means you will have certainty over how much you’ll be paying on your mortgage each month but you may also find your repayments drop too.

If you’re locked into a deal, you may still be able to save by remortgaging onto a better deal. But you should check if you need to pay any fees like an early repayment charge. It’s a good idea to speak to a broker who can talk you through your options. They’ll also crunch the numbers for you – you may find that even after you pay any fees you’re still going to be better off by remortgaging.

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What are mortgage rates?

Mortgage rates are the rate of interest charged by a mortgage lender (bank or building society). The interest is charged by the lender as compensation for the money they have lent them in order to purchase a property.

Interest rates are determined by the lender in most cases, and can be either fixed (ie remain the same for the term of the mortgage) or variable (where they fluctuate with a benchmark interest rate). Before you compare mortgages, you need to understand the different types. For more information see what type of mortgage should I get?

Help finding the best mortgage deal

The best mortgage deal isn’t just about interest rates. You need to consider whether the mortgage term is right for you, arrangement fees and more.

To get a better idea of the best mortgage for you, use our online mortgage service provided by the fee-free mortgage broker L&C.

L&C can compare the latest mortgage deals for you over the phone, or you can do it yourself in real-time online. Whichever you choose they can help search the market to find you the best mortgage deal, see if you qualify and even help you apply online, doing all the legwork to get you your mortgage offer.

Handy tools and calculators

Here’s a selection of practical gadgets and tools to help keep things simple.