TSB, Virgin and Santander are the latest lenders to cut mortgage rates in the past week after data emerged showing prices fell to their lowest level in six months.
Almost two years after the ill-fated mini-budget in September 2022, which led to steep increases in mortgage rates, it appears that financing costs for homeowners are finally starting to ease.
Today’s Moneyfacts data shows that interest rates on average two- and five-year fixed deals fell by 0.21% and 0.18% month-on-month respectively between August and September.
It showed that the typical two-year fixed rate was now at its lowest level since February 2024, while the five-year rate had fallen to levels not seen since March 2024.
Between early August and early September, Moneyfacts said the two- and five-year fixed rate fell to 5.56% and 5.20% respectively.
The average two-year variable mortgage fell slightly to 5.68%, according to Moneyfacts, and for those on their standard variable rate (SVR) the typical rate is 7.99%. At its peak in November and December 2023, it was 8.19%.
Rachel Springall, financial expert at Moneyfacts, said: “Fixed mortgage rates fell across the spectrum in August, which will be welcome news for potential borrowers.
“Overall, average two- and five-year fixed rates have now fallen for the second month in a row and are back to levels not seen for more than six months.
“It may take a few weeks for lenders to respond to a volatile swap rate market, so it is good to see mortgage prices moving in a positive direction. The sense of product stability also returned to the market, as the average shelf life of a deal increased to 21 days, compared to 17 days in August.”
Which lenders have lowered mortgage rates?
TSB announced this morning that it will reduce the interest rate on selected mortgages by up to 0.4%. It came after Virgin unveiled price cuts of up to 0.28% last week and revealed it would be expanding its ‘Fix & Switch’ range. This is a product that allows the mortgage to be fixed at a five-year mortgage rate – which is usually cheaper than a two-year option – but offers an exit option after two years. This means that there are no early repayment costs.
Prior to this, Santander also announced price cuts, just after we reported this NatWest, HSBC, Barclays and Coventry Building Society had cut rates.
Harpen Garcha, director of Brooklyn’s Financialin conversation with the Newspage agency, believes that more cuts are on the way. “TSB has started the week with some significant rate cuts, and you can be sure other banks will follow suit as swap rates continue to fall,” she said. “Now that the holidays are over, these steady declines in interest rates are sure to revive the housing market.”
With inflation rising slightly in July and mortgage rates still higher for people refinancing from historically low deals, experts are warning borrowers to keep a close eye on interest rates and prices.
Gabriel McKeown, head of macroeconomics at Sad Rabbit Investments, said via Newspage: “While optimism is in the air, caution remains necessary as the future trajectory of inflation is still uncertain and any unexpected rise could quickly change the landscape.
“But for now, the mortgage market is finally starting to play a new tune, and it’s music to borrowers’ ears. So while borrowers should remain cautious as lenders lower rates, the winds of change are finally ushering in a new era of affordability for homeowners.”