Nearly two years after the fateful mini-budget in September 2022 which sparked steep mortgage rate hikes, it would appear borrowing costs are beginning to ease finally for homeowners.
Data out today from Moneyfacts revealed rates on average two- and five-year fixed deals fell month-on-month by 0.21% and 0.18% respectively between August and September.
It showed the typical two-year fixed rate was now at its lowest level since February 2024, whilst the five-year had dipped to a level not seen since March 2024.
Between the start of August and beginning of September, Moneyfacts said two and five-year fixed rates dropped to 5.56% and 5.20% respectively.
The average two-year tracker variable mortgage fell slightly to 5.68% said Moneyfacts and, for those on their Standard Variable Rate (SVR), the typical rate is 7.99%. At its peak in November and December 2023 it hit 8.19%.
Rachel Springall, finance expert at Moneyfacts, said: “Fixed mortgage rates fell across the spectrum during August, which will be welcome news for prospective borrowers.
“Overall, the average two- and five-year fixed rates have now fallen for the second month running and are back down to levels not seen for over six months.
“It can take a few weeks for lenders to react to a volatile swap rate market, so it’s good to see mortgage pricing moving in a positive direction. A sense of product stability also returned to the market, as the average shelf-life of a deal rose to 21 days, up from 17 days in August.”
Which lenders have cut mortgage rates?
TSB this morning announced it was cutting rates on selected mortgages by up to 0.4%. It came after Virgin last week unveiled prices cuts of up to 0.28% and revealed it would be expanding its ‘Fix & Switch’ range. This a product which allows mortgage to fix into a five-year mortgage rate – which is typically cheaper than a two-year option – but offers an exit option after two years. This means there are no early repayment charges.
Prior to this Santander also announced price cuts, just after we reported NatWest, HSBC, Barclays and Coventry Building Society had reduced rates.
Harps Garcha, director at Brooklyns Financial, speaking to the Newspage agency, thinks there are more cuts to come. “TSB has kicked off the week with some sizeable rate cuts, and you can bet other banks will follow suit as swap rates keep sliding,” she said. “Now that the holidays are done, these steady drops in rates are sure to fire up the housing market.”
However, with inflation increasing slightly in July and mortgage rates still higher for those remortgaging from historically low deals, experts are warning borrowers to keep a close eye on rates and prices.
Gabriel McKeown, head of macroeconomics at Sad Rabbit Investments, speaking via Newspage, said: “While optimism is in the air, caution remains, as the future trajectory of inflation is still uncertain, and any unexpected rise could quickly alter the landscape.
“But for now, the mortgage market is finally beginning to play a new tune, and it’s music to the ears of borrowers. So, although borrowers should remain cautious, with lenders slashing rates, the winds of change are finally ushering in a new era of affordability for homeowners.”
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