Home owners and buyers were given a boost today as the average on a five year fixed rate mortgage fell below the 5% average benchmark amid a price war among leading lenders.
According to analysts Moneyfacts, the average rate on what is one of the most popular mortgage products stood at 4.99% yesterday, down from 5% exactly the day before.
It is the first time the five year average has dipped below 5% since early September but it is expected to fall further over the coming weeks.
The average rate on five year fixes has not been consistently below 5% since May 2023.
The current downward trend is being driven by falling swap rates in the City money markets where lenders raise the wholesale funds they can then sell on to homeowners in the form of mortgages.
Falling swap rates mean fixed rate home loans for purchases or remortgaging can be priced more competitively.
It will come as a limited relief for the hundreds of thousands of borrowers who took out five year fixed deals during the period of super low interest rates during the pandemic in late 2020, 2021 and early 2022 who have not yet had to refinance them.
Top lenders have been vying with each other to top the best buy tables this week. Today Nationwide launched a market leading two year fixed price at 3.64% for borrowers with a deposit of at least 40% prepared to pay the £1,499 fee.
It follows rival NatWest launching a best buy table topping two year fix at 3.71% earlier in the week.
Aaron Strutt of brokers Trinity Financial said: “Thankfully rates are still getting cheaper as we start the run-up to Christmas and approach the dreaded by many upcoming Budget.
“If you are looking for a five-year fix then there is a lot of choice. Nationwide and NatWest have sub 3.85% five-year fix rates, while Santander has a three-year fix rate priced around 3.8%. Ten-year fixes are priced around 4.5%.
“The rate changes seem unlikely to slow down for a while given the number there have been recently. If you do have a mortgage offer out from your bank or building society it would be a good idea to double check that the lender isn’t offering a better deal before it is too late.
“There are cut off dates with many lenders so if your mortgage provider improves the rate then you need to act to switch to the better product otherwise you could end up paying significantly more than you need to for years .”
Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk said: “The average-five-year fixed rate has fallen below the 5% benchmark for the third time this year. Swap rates have been volatile in recent months, which led many lenders to increase their rates.
“However, recently swap rates have been sitting closer to their 30-day lows which has encouraged more providers to make cuts. While affordability remains a key concern, borrowers looking for more protection from market uncertainty over the next five-years may be pleased by this news.”
