Average mortgage rate cuts persist, though momentum continues to wind down

Nevertheless, borrowers now have more choice, but less time, to secure a deal.

Average fixed mortgage rates fell for the fifth consecutive month at the start of July, according to the latest Moneyfacts UK Mortgage Trends Treasury Report, which may come as welcome news for borrowers in need of a new deal.

The average two-year fixed mortgage dropped to 5.09% during this timeframe, marking its lowest point in almost three years (September 2022), when rates hovered around 4.24%. Similarly, typical five-year fixed prices dipped to 5.08% and were last lower in October 2024 at 5.07%.

However, as was the case when these rates fell a month ago, there are signs of this momentum slowing down – average two- and five-year fixed mortgages only dropped by 0.03 and 0.01 percentage points respectively by 1 July, compared to 0.06 and 0.01 percentage points the month prior.

This slowdown comes amid expectations for fixed rate cuts to “heat up” during the summer, which Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, attributes to recent swap market volatility.

Yet, inflation remains stubbornly above the Government’s 2% target, despite falling marginally to 3.4% in May, which in turn pressures the Bank of England’s Monetary Policy Committee (MPC) to be more gradual in its approach to lowering the base rate. Indeed, many lenders may have been deterred from slashing prices after the MPC elected to hold the UK’s central interest rate at 4.25% in June.

Some sectors even saw prices head in the opposite direction, with the average rate for a five-year fixed deal at 60% loan-to-value (LTV), bucking the downward trend by rising from 4.65% to 4.68% month-on-month.

Average rate gap at narrowest levels since ‘mini-Budget’

With the average two-year fixed mortgage now sitting only 0.01 percentage points above its five-year counterpart, these latest cuts see the gap between the two sectors at its narrowest since the market first inverted back in October 2022.

Traditionally, five-year fixed mortgages were priced higher than two-year products to account for the added risk providers faced for lending for longer periods; however, this was turned on its head after the now infamous ‘mini-Budget’ caused chaos across the market when it was announced in September of that year.

With rates now on the brink of reverting to pre-2022 levels, this could be a positive sign for borrowers, particularly for those looking to lock in rates for longer with their new deal.

More choice, but less time to secure a deal

As well as lower average rates, borrowers now have more deals to choose from, with the total product count now standing at 6,908 mortgages available across the market. This marks the second highest this figure has been in over 17 years, when the number of deals peaked at 7,421, only besting the 6,993 mortgages available to borrowers in May 2025.

Of course, the combination of lenders slashing prices and introducing new deals had a knock-on effect on the average mortgage shelf-life, which unfortunately fell to a four-month low of 16 days at the start of July, down from 17 days in June.

However, this remains far above the 12-day average shelf-life seen just two years ago, showing how far the market has recovered, especially considering how prices have also greatly improved for borrowers. A typical two-year fixed deal during July 2023, for instance, would have cost 6.41%, compared to the current price of 5.09% (as of 1 July 2025), which Springall calculates to be a difference of “£199 per month in repayments on a £250,000 mortgage over 25 years”.

Meanwhile, in response to calls for lenders to do more, many have also relaxed their stress testing criteria – designed to assess whether borrowers can afford their mortgage for the full term. These changes could see affordability boosted even further, particularly among those attempting to get on the property ladder for the first time, though Springall was quick to add that “more progress to support first-time buyers” was needed. With this in mind, it may be worth speaking to a mortgage broker to explore all your options before applying, whether you’re a first-time buyer, a homemover or are looking to remortgage.