The average interest rate on a two year fixed mortgage had fallen below 6% for the first time since June in another boost for the housing market.
Analysts Moneyfacts said the average rate on one of the most popular mortgage products now stands at 5.99%, down from 6.01% yesterday. That’s the lowest since-mid-June.
Mortgage rates soared this year as the Bank of England repeatedly hiked interest rates to bring inflation back under control. But as the rate of price rises began to cool, the Bank paused its cycle of 14 consecutive hikes. Mortgage rates were already falling before that, as City traders anticipated a pause coming soon, but they declined further on the back of the recent pauses, as well as falling inflation rates.
On 31 July, the average two-year fixed-rate mortgage had an interest rate of 6.81%. That was the highest rate in 15 years.
James Hyde, spokesperson at Moneyfactscompare.co.uk, said: “Having peaked at 6.86% in late July, rates have been gently falling since early August due a combination of factors including falling inflation, base rate pauses, and reductions in swap rates.
Many lenders have started offering mortgages with interest rates below 5%. Last week, Barclays offered a five-year fix with a 90% LTV at an interest rate of 4.95%.
“In recent weeks, a number of lenders have again begun to offer sub-5% two-year fixed deals; with lowest rates available UK-wide sitting around 4.75% at present.
“It remains to be seen if the recent rate reductions will continue, as any further rises in inflation, base rate, or swap rates may lead to a reversal.”
The average 5-year fixed residential mortgage rate today is 5.60%. That’s down from a peak of 6.34% in July. Today’s average 2-year tracker rate is 6.15%.
Top lenders Nationwide, Halifax and Santander were among those announcing further rate cuts today. Nationwide reduced rates by up to 0.31%, Halifax by up to 0.25% and Santander by up to 0.32%.
