Aaron Strutt, of broker Trinity Financial, said lenders were passing on their falling borrowing costs – which are influenced by long-term expectations for interest rates – to homeowners.
He said: “They’re trying to stimulate the market as well.
“There’s been almost continuous mortgage rate reductions now for quite some time, which has led to two and five-year fixes being much more competitively priced. The only way lenders are going to get the mortgage and property markets moving again is by offering cheaper mortgages.”
Imogen Pattison, assistant economist at Capital Economics, a research consultancy, said swap rates, which reflect lenders’ borrowing costs, have fallen to their lowest level since May, which will push mortgage rates to a six-month low this month.
She said: “That will support a further recovery in housing market activity in the near term. But, if we are right to think the Bank of England will keep interest rates at their peak for longer than investors anticipate and that unemployment will rise next year, the current downward trend in mortgage rates won’t continue.”
Capital Economics believes markets are being optimistic and predicts that stickier inflation will mean interest rates staying at 5.25pc until November.
If its forecasts are accurate, Ms Pattison said swap rates were “unlikely to fall much further and may even rise”.
