Mortgage rates have come back down just as the summer season draws to an end. Can we expect to see a rush to buy before Christmas?
As lenders continue to slash rates and offer more competitive products in the wake of the Bank of England’s lowering of its base rate – and ahead of its imminent next meeting on Thursday, 19th September – new data shows that this has led to a drop in average rates across the board.
Whether existing homeowners are remortgaging, first-time buyers are taking out new borrowing, or investors are setting up a buy-to-let mortgage deal, the good news is that all mortgage rates have inched down over the past month.
According to Moneyfactscompare, the average two-year fixed rate is now 5.56% (as of the start of September), which is a fall of 0.21% compared with August’s figures. Meanwhile, the average five-year fixed rate now stands at 5.20%, having fallen by 0.18% month-on-month.
For borrowers on a variable tracker – where banks track the Bank of England base rate to set mortgage rates – the average has also fallen slightly, and it now sits at 5.68%. For those on a standard variable rate – which all products revert to automatically if the borrower does not secure a new deal – the average has fallen slightly to 7.99%.
Mortgage rates down to six-month lows
With fixed mortgage rates falling for the second month running, they are now back down to a level not seen in the past six months, notes Rachel Springall from Moneyfactscompare. Despite starting the year positively, some rates had begun to creep back up again amid economic uncertainty.
A welcome “sense of stability” can also now be seen in the mortgage market, says Springall, as the average number of days a mortgage deal is available has now risen to 21 days, up from 17 days in August. This reduces the sense of urgency borrowers may face in securing a good deal before products are withdrawn.
The lowest average mortgage rates can currently be found on five-year fixed rate products with 60% loan to value (LTV), ideal for borrowers with larger deposits, with an average rate of 4.70%.
However, depending on the borrower’s circumstances, lower rates than this are available, including in the buy-to-let mortgage market for landlords. It is worth noting that lower mortgage rates can sometimes come with higher fees, and some lenders also offer a range of incentives with their products, so it is worth looking at all the options rather than focusing solely on rates.
A two-year journey
Rachel Springall looks back on how mortgage rates have got to the point they are at today.
“This month marks two years since the fiscal announcement took place, 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.
“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 (SVR), but fixed rates remain lower on average.”
Time to explore your options
The recent drop in fixed mortgage rates is “encouraging”, according to Jonathan Bone, Lead Mortgage Adviser at online mortgage broker at Better.co.uk. This is especially the case for those who have been biding their time and waiting for more favourable market conditions.
He added: “With rates at their lowest levels since early 2024, now could be a good time to explore your options. However, it’s essential to remain cautious and prepared.
“First-time buyers should focus on improving their credit scores, saving as much as possible for a deposit, and exploring different loan-to-value (LTV) options, even as the availability of certain deals has tightened.”
“It’s also important not to rush your decision. While rates have come down, they’re still higher than they were just a few years ago, so make sure you have a clear budget in mind, accounting for all potential costs, including solicitors fees and survey costs.
“Speaking with a mortgage broker can help you navigate the complexities of the market, find the best deals available, and ensure you’re making a choice that suits your long-term financial goals.”
