The average mortgage rate has dropped below 5%, the latest Moneyfacts data shows.
The average rate across all fixed rate terms has hovered just on or above the 5% mark for the past few weeks, but dropped to 4.99% on Friday.
The average two-year fixed rate is now 4.94%, the average five-year fix is 5.00%, and the average 10-year rate is 5.71%.
Rachel Springall, finance expert at Moneyfacts, said: "A handful of lenders adjusted mortgage rates with Barclays reducing selected fixed rates by up to 0.13% or increasing others by up to 0.10%, while Yorkshire Building Society reduced selected rates by up to 0.23%. As a result, the Moneyfacts average mortgage rate has fallen from 5.00% to 4.99%.
“Borrowers will no doubt be thrilled to see mortgage rates drop, particularly the millions due to come off a cheap fixed rate before the year is over. It is a notable milestone to see the Moneyfacts average mortgage rate drop below 5%, although it remains uncertain on how long this can be sustained. It has been over a month since the rate last fell below 5%, (3rd September – 4.99%), before then, the rate had not dipped below 5% since September 2022. Mortgage rates escalated in the aftermath of the infamous ‘mini-Budget’, with the Moneyfacts average mortgage rate breaching 5% just one week afterwards. The situation for borrowers seeking a new deal only got worse as, by October, the rate rose above 6%.
“The enduring uncertainty in the aftermath of the ‘mini-Budget’ led to not only a rise in rates, but lenders pulled hundreds of deals from sale. The closest comparison to such upheaval was felt due to the Covid-19 pandemic and UK lockdown. To further pinch consumers, inflation rose to double digits and the Bank of England Base Rate rose to 5% by late June 2023. As a result the Moneyfacts average mortgage rate breached 6% again.
“Fast forwarding to the present day, mortgage rates are much lower thanks to base rate cuts and swap rate movements. However, sticky inflation makes it less likely for the Bank of England’s Monetary Policy Committee to unanimously agree on making more cuts. In addition, uncertainty remains surrounding what may be revealed within the Budget. That said, fixed rate mortgages do not always bend to the will of base rate cuts, and instead are more intrinsically linked with swap rates. Borrowers keen to refinance would be wise to seek advice to secure a new deal and not wait around for more rate cuts by the Bank of England.”
