He said: “The problem is that swap rates have risen in January so it is unlikely that mortgage rates continue in a downward trajectory.
“The thinking further ahead is the recent moves in swap rates are consistent with lenders cutting mortgage rates aggressively so far this year. The risk is that mortgage rates start to rise again if the BoE doesn’t cut interest rates that much this year and market pricing will adjust [as a result].
“Mortgage rates have possibly fallen as far as they could have and they might rise again over the next few months.”
Swap rates – the main pricing mechanism for fixed rate mortgages – have risen marginally, with two-year swaps up 0.18 percentage points and five-year swaps up 0.27 points on last month.
Lenders have been cutting rates aggressively since the start of January which has led to a mini rates war – as the market bet on cheaper borrowing costs. Many lenders correctly predicted Threadneedle Street would hold rates at 5.25pc in December.
According to analysts Moneyfacts, the average two-year fix rate today is 5.56pc, while the average five-year fix is 5.19pc.
It comes as average interest rates on new mortgages fell in December for the first time since 2021, which has eased the pain on borrowers.
BoE figures show that the effective interest rate on new deals fell to 5.28pc last month from 5.35pc in November.
