Average two- and five-year fixed mortgage rates fell month-on-month by notable margins, now both at their lowest levels since early September 2022, Moneyfacts reveals.
The latest data shows that the average mortgage rate on fixed contracts with a term of two and five years has fallen by 0.08% and 0.10% to 4.86% and 4.91% respectively, both now at their lowest point since September 2022.
It is the first time since May 2023 that the average five-year interest rate has fallen below 5%.
Moneyfacts’ average mortgage interest rate fell from 4.99% to 4.91% month-on-month. On an annual basis, interest rates have fallen by 0.53%, compared to 5.44% in December 2024.
Data shows that mortgage activity has led to a decline in the average life of a mortgage to 18 days.
Meanwhile, the average two-year variable mortgage rate remained unchanged at 4.66% month-on-month, but has fallen 0.80% year-on-year from 5.46%.
And the average standard variable rate (SVR) remained at 7.27% month-on-month, but fell 0.58% year-on-year from 7.85%. For comparison, the highest recorded figure was 8.19% in November and December 2023.
Elsewhere, data shows product choice rose month-on-month to 7,054 options, near a record high.
Moneyfacts says the drive to support borrowers seeking higher loan-to-value (LTV) deals has been evident over the past twelve months.
Year-over-year deals with an LTV of 95% increased by 111 and those with an LTV of 90% increased by 155. No other LTV level increased by more than 100 deals year-over-year.
Moneyfacts finance expert Rachel Springall says: “Year-on-year, the mortgage market has seen an optimistic shift in the availability of products aimed at borrowers with a small deposit or equity, with almost 300 products added to the selection with a loan-to-value of 90% and 95%.”
“The volume of deals at these levels is now at the highest level since March 2008. The government has been very clear that it wants lenders to do more to support buyers to drive UK growth. Any improvement in high loan-to-value ratio deals should be celebrated as it gives borrowers more choice as competition increases.”
“The improvement in mortgage costs and product availability paints a positive picture for borrowers as we head into the new year. This year has not been without a few ups and downs in terms of interest rate movements and product availability, but all signs look encouraging that the mortgage market will thrive in 2026.”
“The budget is over, expectations for a new cut in the base interest rate are high and the combination of moderate house price growth may lead to optimistic sentiment among buyers.”
“However, those who took out a cheap fixed deal five years ago will have to accept that they will have to cover higher repayments, with the Bank of England expecting 3.9 million households to refinance at higher interest rates over the next three years. Getting initial advice before buying or taking out a new mortgage will be essential in helping borrowers navigate the mortgage maze.”