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Ella Mower

Content Writer
Published: 08/12/2023
House for sale

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This is the first time the average two-year deal dropped below 6% since June 2023.

The average rate for a two-year fixed mortgage fell below 6% today for the first time since mid-June of this year – dropping to 5.99% according to Moneyfacts’ data.

This is some months behind the average five-year fixed deal, which dropped below 6.00% in September and currently sits at 5.60%.

“Having peaked at 6.86% in late July, rates have gently been falling since early August due to a combination of factors including falling inflation, base rate pauses and reductions in swap rates,” explained James Hyde, Spokesperson at Moneyfactscompare.co.uk.

“In recent weeks, a number of lenders have begun to offer sub-5% two-year fixed deals, with the lowest rates available UK-wide sitting around 4.75%”, Hyde went on to add.

With the Bank of England’s Monetary Policy Committee (MPC) meeting to vote on the base rate next week, a cut to the central interest rate or even a prolonging of the pause could see average mortgage rates continue to fall further.

What effect does the Bank of England base rate have on mortgage rates?

The base rate is a central interest rate that commercial banks receive when they hold money with the Bank of England. Increases and decreases to the base rate can be reflected in the rate these banks charge customers to borrow money (i.e. the amount of interest you pay on your mortgage).

Average two-year fixed deal falls below 6% Average two-year fixed deal falls below 6%
Average two-year fixed deal falls below 6% Average two-year fixed deal falls below 6%
Average two-year fixed deal falls below 6% Average two-year fixed deal falls below 6%

Graph: The average rate for a two-year mortgage fell below 6% for the first time since June.

Is the mortgage market improving?

Mortgage rates were driven up earlier this year as the Bank of England’s MPC made consecutive hikes to the base rate in an attempt to quell chronically high inflation.

With inflation slowing dramatically to 4.6% in the year to October and the MPC holding the base rate at 5.25%, average mortgage rates have gradually been on the decline – an indication the market is improving.

A further positive sign, the mortgage market continues to see its highest product availability in over 15 years, with 5,766 deals available at the start of today.

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Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfactscompare.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.

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