The average two-year fixed rate deal is now 6.19pc and the average five-year deal is 5.79pc, according to the data firm Moneyfacts, down from nearly 7pc in July.
However, even though rates are on a downward track, current levels are still a big jump for those who had taken out a two-year deal in 2021, when average rates were well below 3pc.
The two-year swap rate fell from 4.78pc to 4.66pc this week as the five-year rate dropped from 4.27pc to 4.13pc.
Swap rates reflect market expectations of the future Bank of England rate and are used by lenders to set fixed-rate mortgages.
Market conditions and customer demand also factor into lenders’ decision making and could see rates fall further before the end of the year.
Usually lenders price their home loans above swap-rates to allow for a profit margin on lending.
Yet, some lenders are understood to be prepared to reduce their margins on mortgage loans in order to increase their total lending in 2023, as a sluggish housing market has left them below their targets.
Simon Gammon, head of finance at Knight Frank said: “Lenders really do want to lend and they have been cutting their margins to the bare minimum and in some cases they have been loss making.”
Nicholas Mendes, mortgage manager at broker John Charcol said: “I expect we will see rate changes for the next three to four weeks before lenders postpone for the new year.
“Lenders will be walking a tightrope between trying to make up for lost time and win as much business as possible but equally aware of the impact on service levels.”
