Why are sub-4% deals returning?

Mortgage pricing is influenced not only by the base rate but by financial market expectations — particularly swap rates, which lenders use to price fixed deals.

Global economic uncertainty, including the impact of US tariff policies, has led markets to expect more base rate cuts this year. As a result, swap rates have fallen, making cheaper fixed-rate pricing viable again.

At present:

  • The average two-year fixed mortgage rate stands at 5.21%.
  • The average five-year fixed rate is 5.12%.

However, select borrowers with larger deposits are now able to access deals below 4%.

This article provides general information and is not personal financial advice.

Timing risk for borrowers

More than 80% of mortgage holders are on fixed-rate deals, meaning their interest rate does not change until their term ends.

Around 800,000 fixed-rate mortgages — many currently at 3% or lower — are due to expire each year until the end of 2027. For those borrowers, refinancing decisions carry real financial weight.

Some borrowers are opting for shorter two-year fixes in anticipation that rates may continue falling. Others prefer the certainty of longer-term fixes to avoid repeated exposure to market fluctuations.

Aaron Strutt of Trinity Financial noted that while rates could fall further if the base rate declines, “there are no guarantees.”

Longer fixes gaining interest

Some lenders are positioning longer-term fixed products — such as 10- or 15-year mortgages — as a way to offer stability.

April Mortgages, for example, has introduced products allowing borrowing up to seven times income in certain cases, reflecting increased flexibility among lenders competing for customers.

Supporters of longer-term fixes argue that certainty of payments helps households plan around other costs, such as childcare and living expenses, without the risk of payment shocks after two years.

Growing competition in the market

Lenders are also competing in other ways:

  • Adjusting remortgage pricing
  • Offering improved deals to existing borrowers
  • Tweaking affordability criteria

Nationwide Building Society has recently introduced improved remortgage rates, another sign of competitive pressure.

David Hollingworth of L&C said that sub-4% deals are now becoming part of mainstream product ranges rather than short-lived promotions.

However, he cautioned that global uncertainty means rates could move quickly in either direction.

Should borrowers fix now or wait?

Because lenders allow borrowers to secure a new deal several months before their current one expires, some homeowners are locking in rates early as a safeguard. If rates improve before the deal begins, they may still be able to switch.

That strategy can provide flexibility while limiting exposure to sudden rate increases.

Whether to choose a shorter or longer fix depends on individual priorities, including appetite for risk and desire for payment stability.

What this means for you

If you are:

  • Approaching the end of a fixed deal
  • Considering remortgaging
  • Buying your first home

Sub-4% deals may be available depending on deposit size and affordability. However, headline rates do not guarantee eligibility, and market conditions remain fluid.

Understanding current lender criteria and how different fixed terms affect monthly payments can help clarify options.

You can explore available mortgage options based on your circumstances to see how current rates apply to you.
(Exploring options provides information only and does not constitute financial advice.)