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Mortgage rates see biggest monthly fall since December 2022

mortgage Looking through ash trees towards suburban residential properties and distant city high-rises in Ruskin Park, a public green space in Lambeth, on 9th November 2023, in London, England. (Photo by Richard Baker / In Pictures via Getty Images)
Mortgage rates have also fallen in the first-time buyer bracket of the market. (Richard Baker via Getty Images)

The average two-year fixed mortgage rate available to UK borrowers has fallen at the fastest monthly rate since the end of 2022, new data shows.

Moneyfacts reported that the average two-year fixed mortgage rate fell “significantly” in January, by 0.37%, its biggest monthly fall since December 2022.

Across all deposit sizes, the average two-year fixed-rate mortgage had a rate of 5.56% at the start of February 2024, down from 5.93% at the start of January this year.

Five-year fixed mortgage rates edged down from 5.55% to 5.18% on average, comparing the start of January 2024 with the start of February this year.

Rachel Springall, a finance expert at Moneyfacts, said: “Borrowers searching for a new mortgage deal may be delighted to know fixed mortgage rates continued their downward trend, with the average two-year fixed rate dropping by its biggest margin since December 2022.

Read more: Best UK mortgage deals of the week

“Those borrowers who have waited patiently in recent months to re-finance, or indeed are preparing for when their mortgage deal expires, would be wise to review rates, as lenders are closely monitoring the volatile swap rate market, which tends to influence fixed-rate pricing.

“There have been big expectations for fixed rates to fall further, and whether now is the right time to refinance will come down to an individual’s circumstances.

“Lenders are in constant review of their ranges, and it is likely rates will fluctuate in the coming weeks due to the noises surrounding future rate expectations.”

She also mentioned that mortgage rates have fallen for first-time buyers. "The average two-year fixed-rate mortgage at 95% loan-to-value (LTV) has dropped below six percent for the first time since May 2023 (sitting at 5.84% at the start of February), much lower than six months ago, when it was just over 7%."

In February, Moneyfacts recorded 5,787 mortgage products on the market, which was slightly lower than the 5,899 available in January. This was the first monthly drop since July last year.

Santander (BNC.L) is cutting rates on mortgages for borrowers looking to remortgage and for buy-to-let landlords.

The lender said residential borrowers would see cuts of 0.05% and 0.16%, while rates for property investors would be reduced by 0.05% and 0.16%.

It comes only three weeks after the bank became the first major lender to increase mortgage rates this year despite fierce competition in a sluggish market.

Justin Moy, managing director of EHF Mortgages, said the cuts suggested that “we are currently in a yo-yo mortgage market.”

Read more: The on-trend features luxury property buyers are looking for this year

Meanwhile, London rental price growth showed signs of a slowdown in January as landlords try to entice tenants back to the market.

Estate agency Chestertons said there were 41% more rental properties available in London than in January last year.

Such properties remained on the market for longer in the face of muted demand meanwhile, as per Rightmove, at 39 days rather than 33.

As a result, there has been a 76% rise in landlords reducing their asking rents from last year, the estate agent said.

Adam Jennings, head of lettings at Chestertons, said: “We have seen a significant increase in landlords bringing their property to market as they have been attracted by the substantial rent increases over the last 18 months or so.

“This influx of properties has led to more choice for tenants and as a result, many landlords have decided to lower their rent expectations.”

Watch: Jump in mortgage arrears and 11% rise in buy-to-let repossessions

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