The average five-year fixed-rate residential mortgage has dropped back below 6% today, in the latest sign of good news for homeowners and prospective buyers.
According to data from Moneyfacts, the average rate on a five-year deal fell to 5.99% today, from 6.03% on Wednesday.
The average two-year deal also declined, falling to 6.50% from 6.53%.
Simon Gammon, Managing Partner at Knight Frank Finance, said: “Lenders continued to cut mortgage rates in the wake of better inflation figures and the Bank of England's decision to hold the base rate at 5.25% this month, which will do a lot to improve sentiment in the property market.
“We do expect more, marginal cuts during the weeks ahead, but that will soon reach a plateau. The best fixed rate deals already start with a four, and we expect rates to settle in that range until the Bank of England opts to cut the base rate, which is unlikely before next spring at the very earliest.”
Mortgage lenders have been cutting rates for almost two months, after they peaked at 6.37% in early August, the highest rate in 15 years and beyond even the aftermath of last year’s mini-Budget.
But the cuts accelerated over the past week, after the Bank of England paused its cycle of interest rate rises after 14 consecutive hikes. That fuelled confidence that the Bank’s rates may have already peaked, and if not then there is only one more hike remaining. City markets still think that one more hike is more likely than not, but see a roughly 30% chance that rates have already peaked.
Major lenders like HSBC, Nationwide and Natwest have all cut rates in recent days.
Lewis Shaw, owner and mortgage expert at Shaw Financial Services, said top lenders have engaged in something of a bidding war to win back customers after the soaring rates earlier this year kept buyers out of the market.
“Lenders are dropping their rates at breakneck speed in an attempt to stimulate activity and boost their market share,” he said.
Some lenders have begun offering select rates at below 5%, though most of these are still for mortgages with low loan-to-value.
Though prices are falling, existing homeowners with a fixed-rate deal that is set to expire soon are still likely to face much higher payments when they new fix begins, as interest rates are still much higher than they have been for almost all of the past decade.
