Average two and five-year fixed rates have seen the biggest monthly falls for more than a year, according to figures from Moneyfacts. 

It is the third consecutive month that the cost of both fixed-rate terms has dropped.

The average two-year fixed rate dropped by 14 basis points to 2.38%, while the five-year equivalent reduced by 12 bps to 2.63%.

These are the largest month-on-month reductions seen since the onset of the pandemic when between April and May 2020 rates fell by 27 bps and 31 bps respectively.

The largest rate falls this month were recorded in the 90% LTV tier, where the average two-year fixed rate dropped by 23 bps to 2.85% and the five-year equivalent reduced 18 bps to 3.23%.

At the other end of the scale at 60% LTV, the average two-year fixed fell by 4bps to 1.51% and the average five-year fixed dropped by 8 bps to 1.71%. Compared to the equivalent rates in September 2019, these are now 33 bps and 47 bps lower respectively as lenders compete to attract borrowers.

Moneyfacts finance expert Eleanor Williams says: “September marks the eleventh consecutive month of growth in total mortgage availability as the sector demonstrates resilience in the aftermath of an unprecedented 18-months. 

“Rising by 152 this month, there are now 4,812 options for borrowers to consider. 

“This is almost double the amount that was on offer this time last year (September 2020 – 2,412) and the highest this total has been since March 2020 (5,222) at the onset of the pandemic, as borrowers’ level of choice has improved across the LTV tiers (except for the limited 100% LTV bracket).

“Those with smaller levels of deposit may be pleased to see that at 90% and 95% loan-to-value (LTV) there are now 579 and 283 products on offer, compared to just 62 and 14 this time last year when lenders had withdrawn swathes of higher risk, high LTV products. 

“Even though availability in these top lending brackets remains below pre-pandemic levels, this month the most significant rate drops were recorded at 90% LTV.

“The average two-year fixed rate at 90% LTV has [fallen below] 3% for the first time since July 2020 and is at its lowest since June 2020 when it hit 2.3%, indicating that lenders may be competing for business in this arena.

“Housing supply remains a key issue however, and whilst the stamp duty holiday fuelled market movement, the level of demand has meant a continued rise in house prices. 

“According to Halifax these rose to a record high in August, and while the pace of increase has slowed slightly, evidence of the ‘race for space’ remains. 

“It is unknown whether borrowing levels will become more subdued in the months ahead, accounting for a seasonal slow-down and the fact that many consumers are returning to work or taking a much-needed break, but there seems to be no signs of lenders easing off the rate war.

“Those looking to move will need to act quickly in their property search and those looking to remortgage could save a significant sum by taking advantage of a low-rate deal. 

“Lenders are keen to take on new business and due to the market volatility, borrowers would be wise to seek independent advice to navigate the growing choice to ensure they find the most appropriate mortgage package for their circumstances.”