Mortgage rates surged in the wake of Liz Truss’s bungled mini-Budget last year, and they had already been on the rise after a wave of rate hikes by the Bank of England to cool inflation
The average two-year fixed-rate mortgage has fallen back below 6% for the first time since June.
Industry experts Moneyfacts said the average was now 5.99%, with many lenders offering deals for a lot less than that to those with bigger deposits.
Mortgage rates surged in the wake of former Prime Minister Liz Truss ’s bungled mini-Budget last year. They had already been on the rise after a wave of rate hikes by the Bank of England to cool inflation.
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.
“In recent weeks, a number of lenders have again begun to offer sub-5% two-year fixed deals. It remains to be seen if the recent rate reductions will continue.”
The Bank of England is expected to freeze its base rate at 5.25% when its Monetary Policy Committee votes on Thursday December 14. According to Moneyfacts, the average five-year fixed rate mortgage is now 5.60%.
There are currently 5,766 residential mortgage products available. On buy-to-let mortgages, the average two-year fixed is 6%, and 5.94% for a five-year deal.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said the rapid rise in mortgage rates had put the brakes on mortgage approvals. “There’s a good chance that the 6% threshold could be psychologically important for a number of buyers, who decide it’s a good time to take the plunge,” she added.
“It’s not going to be a seismic shift. Given that rates are expected to fall further from here – and that drops will accelerate once rate cuts are on the cards, there are plenty who will decide to wait and see.”
Lender Santander reduced its mortgage rates by to 0.32% on Friday. Its five-year fixed rate loan for a home buyer with a 40% deposit has fallen to 4.39%.
Economists are not expecting the Bank of England to begin cutting rates any time soon, potentially limiting the extend of any mortgage price war between lenders.
