Average mortgage rates on two- and five-year fixed rate deals have fallen significantly over the last month, while the shelf-life of a home loan product lifted.
Two-year fixes fell 21 basis points to 5.56% in September from August, their lowest level since February, according to Moneyfacts.
Five-year fixes fell 18bps to 5.20%, their lowest level since March.
The average two-year fix is 36bps higher than the five-year term, and has been higher than its five-year equivalent since October 2022, a month after the mini-Budget.
The average two-year tracker variable mortgage fell 27bps to 5.68% in September.
The average ‘revert to’ rate or standard variable rate was down 17bps to 7.99%. By comparison, the highest recorded rate for this interest measure was 8.19% during November and December 2023.
The product choice offered by lenders fell by 134 month-on-month, to 6,523 options.
However, the average shelf-life of a mortgage product rose to 21 days, up from 17 days over the period.
Moneyfacts finance expert Rachel Springall says: “Fixed mortgage rates fell across the spectrum during August, which will be welcome news for prospective borrowers.
“Overall, the average two- and five-year fixed rates have now fallen for the second month running and are back down to levels not seen for over six months.”
Springall points out: “This month marks two years since the fiscal announcement took place [the mini-Budget in September 2022], and subsequent unsettled times saw significant rises to mortgage rates.
“At the start of September 2022, the average two-year fixed mortgage rate stood at 4.24%; a year later it was 6.70%.
“Fixed mortgage rates are now much lower than they were this time last year, but it remains the case that the average five-year average rate is lower than its two-year counterpart, which has been the case since October 2022.
She adds: “The start of August also brought the first Bank of England base rate cut in over four years, which has led to reductions in both the average two-year tracker rate and average standard variable rate, but fixed rates remain lower on average.”
The Moneyfacts expert says: “Mortgage availability was impacted during August, as product choice felt its biggest month-on-month drop since February 2024, quite a contrast to the notable uplift in products seen during previous months.
“A deeper dive into the loan-to-value sectors revealed the biggest drops were at 85% and 80% LTV of 27 and 25 deals respectively.”
