A fall in swap rates since the Bank of England’s base rate cut last week offers “light on the horizon” for homebuyers and buy-to-let investors, according to data from Octane Capital.  

The Bank’s Monetary Policy Committee voted 7-to-2 to cut the interest by 0.25% to 4.5% last Thursday. 

Since then the average five-year swap rate, on which mortgage rates are based, is 4.22% today from 4.33 a month ago. 

The specialist lender adds that prior to this, five-year swaps averaged 4.23% between the October Budget and the end of last year, before climbing to 4.31% between 1 and 6 January this year. 

The firm points out that last year, the average two-year 75% loan-to-value BTL mortgage rate sat at 4.53%, but fell to 4.38% last month. 

The average two-year 75% LTV rate offered to owner-occupiers has fallen to 4.65% this year from 4.81% in 2024. 

Octane Capital chief executive Jonathan Samuels says: “It is, of course, still very early days, but current market indicators suggest that there is light on the horizon for the nation’s home movers and buy-to-let investors and the year ahead is set to be one of far greater positivity when compared to 2024. 

“Not only have we seen swap rates trending downwards so far this year, but this is a trend that will have been strengthened by the Bank of England’s decision to cut the base rate to 4.5% last week and some industry sources are already showing five-year swap rates having fallen below the 4% threshold, which is big news.” 

Samuels adds: “We’ve also seen lenders act with greater confidence, choosing to reduce mortgage rates in anticipation of the recent interest rate cut and this simply wasn’t the case during the closing stages of last year despite us seeing two base rate reductions. 

“The outlook is a very good one for the year ahead and we expect mortgage affordability to continue to strengthen over the coming months, bringing a much-needed boost to property market sentiment.”