Mortgage rates have fallen to their lowest point since March and are expected to fall further.
Lenders have been cutting rates individually throughout July and have announced major deals with rates below 4% for borrowers with sufficient equity.
But now the data shows how much the two- and five-year fixed rate has fallen on average over the past month. According to Moneyfacts.co.uk, they fell by 0.18% and 0.15%.
The latest report shows that the average two-year fixed rate fell to 5.77% between early July and early August. Meanwhile, the five-year fixed rate now averages 5.38%.
Two-year fixes are still more expensive, on average 0.39%, than five-year options.
The average ‘revert to’ rate or standard variable rate (SVR) fell to 8.16%, which is slightly lower than the highest rate recorded (8.19%) in November and December 2023, Moneyfacts said.
But as mortgage rates have fallen, both the choice available and the length of time each product is on the shelves have fallen. Moneyfacts said mortgage offerings fell slightly month-on-month, to 6,657 options. Meanwhile, the average term of each mortgage fell from 30 days to 17 days between July and August.
Rachel Springall, financial expert at Moneyfacts, said: “Lenders have been vigorously reviewing their deals in July due to falling interest rates. swap ratesand the volatility in the mortgage market was highlighted by the notable drop in the average life of a mortgage to just 17 days, compared to 30 days in June.
“Interest rates are expected to fall further in the coming weeks, especially as the market considers the 0.25% cut in the base rate, the first cut in more than four years.”
Springall said that when it came to the availability of mortgages, supply with a 95% LTV – this is for borrowers with 5% down payments or equity – fell slightly in early August.
However, the largest month-on-month decline within any LTV segment was 80% LTV, down 53 products to the lowest level since March 2024.
“This could be disappointing news for borrowers with limited deposits or equity,” Springall said, “but choice could well recover in the coming months as lenders reassess their approach to lending at these higher LTV levels.
“It is essential that borrowers act quickly to secure a new deal if they are looking to refinance this year or purchase a property for the first time.
“It is wise to seek advice from an independent broker, especially to stay informed about the progress of the products.
“The average standard variable interest rate (SVR) is around 8%, so the incentive to switch to a fixed mortgage or a tracker mortgage is clear.
“A variety of lenders have priced their lowest interest rates even lower in recent weeks, leading to a return of fixed rates below 4% by the end of July, but borrowers should look beyond the initial rate and rate each mortgage based on its total actual cost.”