Mortgage prices edged downwards this week as lenders tweaked pricing and policy to attract borrowers ahead of a possible August base rate cut.

The average two-year fixed mortgage rate dropped by 0.02% to 5.01%, the latest Moneyfacts ratewatch data shows.

This means the typical two-year fixed rate now matches the five-year average, which remains unchanged week-on-week.

This nudged the overall Moneyfacts average mortgage rate down slightly from 5.05% to 5.04%.

Lloyds Bank and Halifax led the charge among mainstream lenders, slashing rates by up to 0.28%, while Santander trimmed selected products by up to 0.08%. Conversely, Virgin Money increased some higher loan-to-value (LTV) deals by as much as 0.20%.

Mutuals have also been active. Nationwide cut selected fixed rates by up to 0.21%, Coventry Building Society by 0.05% and Darlington Building Society by up to 0.20%.

Leeds Building Society launched a new ‘Income Lifter’ mortgage range, starting from 3.91% for two-year fixes and 4.07% for five-year fixes. These products support loan-to-income (LTI) multiples of up to 5.5x for borrowers earning at least £50,000 annually.

Further easing of affordability limits came from MPowered Mortgages, which trimmed some three-year fixes by up to 0.10%, and Precise Mortgages, which raised LTI limits to 6x for all borrowers.

Among the standout deals this week is Santander’s two-year fix at 60% LTV, priced at 3.73% until November 2027.

Moneyfacts head of news Adam French said: “A few high street banks have resumed making cuts after quiet period and there has been good news for first-time buyers as more lenders have moved to embrace looser loan to income rules which could help more people get on the housing ladder.

“Rates are still on the downward trend with average two- and five-year fixed rates now drawing level. Despite fair bit of swap rate volatility as both the two- and five-year rates have hit 30-day highs recently, many economists are still forecasting an August base rate cut which may give lenders greater confidence to continue making positive moves.”