Average 2-year and 5-year fixed mortgage rates have fallen to the same level for the first time in almost three years, in a sign of easing borrowing costs ahead of next week’s interest rate decision.
Rightmove’s latest daily mortgage tracker shows that both the average 2-year fixed and 5-year fixed mortgage rate now stand at 4.52%.
The last time the two products were level was in September 2022, prior to the market turbulence caused by the mini-Budget.
The current average two-year fixed rate is down sharply from 5.25% a year ago. Based on the average asking price of a home, this equates to an estimated monthly repayment of £1,518 – £132 less than the £1,650 required a year earlier, assuming a 20% deposit and a 30-year term.
CUTS EXPECTED
The cheapest available mortgage product on the market is now a 2-year fixed, 60% loan-to-value deal at 3.69%. Two-year products have been the lowest-priced option since April.
Matt Smith, mortgage expert at Rightmove, says: “Over the last week, average mortgage rates have remained pretty flat in the build up to next week’s interest rate decision.
“Expectations are currently set on a cut next week, and I expect lenders will use this moment as an opportunity to reduce mortgage rates a little further.”
He adds: “Rate drops have been very slow and steady this year, but someone looking to take out a mortgage right now is likely to see a notable reduction in the rate they’d have been offered this time last year, particularly someone looking to fix for two years.
“With average 2-year and average 5-year fixed currently level, it would appear to only be a matter of time before the typical 2-year rate is cheaper than the 5-year equivalent.”
AFFORDABILITY ISSUES
Nathan Emerson, chief executive of Propertymark, adds “Affordability continues to be the number one issue for many aspiring and current homeowners.
“Therefore, seeing banks continue to improve their mortgage products will be much needed and welcome news for many.
“At a time when people are facing higher taxation connected with property transactions in many cases, ever more challenging deposits which are needed to enter the property market, and general cost of living increases, a wider variety of more affordable products is essential to help combat and further support consumers.
“It remains imperative that the cogs of the housing market continue to turn as it plays a crucial role in wider economic health.”
