‘Welcome news’ for borrowers as average fixed mortgage rates fall for second consecutive month

The average prices of two- and five-year fixed deals return to levels unseen for over six months.

The UK mortgage market continued to experience positive momentum throughout August, with the average prices of two- and five-year fixed deals falling to their lowest levels since February and March 2024, respectively, by the start of this month.

This is according to the Moneyfacts UK Mortgage Trends Treasury Report, which revealed the typical two-year fixed mortgage rate dropped 0.21 percentage points in the month to September, to sit at 5.56%. Meanwhile, the average rate charged for a five-year fixed mortgage stands at 5.20% on a first of month basis, having fallen 0.18 percentage points over the same period.

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, expects these latest figures to come as “welcome news for prospective borrowers” after a tumultuous two years which saw “significant rises to mortgage rates”.

This month marks the second anniversary of the September 2022 mini-Budget which was a catalyst for lenders to withdraw and reprice deals; subsequently, the average two-year fixed mortgage rate rose sharply from 4.24% to 6.70% within a year.

However, with fixed rates falling for a second consecutive month, an increase in the amount of time a product is typically available could be a further sign the market is now in recovery. The average shelf-life of a mortgage deal extended from 17 days in August to 21 days at the start of this month.

Is now the time to consider a fixed mortgage?

After the first cut to the Bank of England base rate in more than four years took place last month, some borrowers may be contemplating whether now is the time to opt for a fixed or variable rate mortgage.

It’s often the case reductions to the base rate are quicker to impact variable deals than fixed rate mortgages. Despite the average two-year tracker rate falling by a considerable 0.27 percentage points in the weeks following the base rate announcement, at 5.68% on a first-of-month basis, it remains more expensive than a typical two-year fix.

Nevertheless, those who believe there will be more cuts to the UK’s central interest rate in the not-too-distant future could consider a variable rate in the hopes any potential reduction will be passed on.

That being said, borrowers awaiting a further decline in mortgage rates while sitting on their lender’s Standard Variable Rate (SVR) will likely find it more cost effective to secure a new fixed deal. Although the average ‘revert to’ rate fell from 8.16% in August to 7.99% by September, monthly repayments at this rate would still be over £300 more expensive than an average-priced two-year fixed mortgage (based on a £200,000 loan repaid over 25 years).

Whether you’re looking for a fixed or variable rate deal, consider seeking advice from a broker to help navigate the market and find the best mortgage for your needs and circumstances.

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