Average mortgage rates have fallen for the first time in months, new data has revealed.
Data published by financial information company Moneyfacts shows that two and five-year fixed-rate deals have dropped for the first time since the spring.
The average rate on a two-year fixed deal is 6.79 per cent, down from 6.81 per cent. Meanwhile, the average five-year rate has dropped from 6.33 per cent to 6.31 per cent.
The average two year tracker mortgage has remained unchanged, at 6.03 per cent.
It comes after a surprise drop in the rate of inflation, from 8.7 per cent to 7.9 per cent.
The Office for National Statistics (ONS) revealed that the rate of increase had “slowed substantially” to its lowest annual level since March 2022.
Experts have forecasted that the drop means that the Bank of England is less likely to keep interest rates higher for longer, taking pressure off of mortgage holders.
While core inflation has dropped back after May’s 30-year high, it is still well above the Bank’s official 2 per cent target – estimated at around 5.75 per cent.
Chancellor Jeremy Hunt said that ‘we aren’t complacent and know that high prices are still a huge worry for families and businesses’
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Chancellor Jeremy Hunt said that ‘we aren’t complacent and know that high prices are still a huge worry for families and businesses’
(PA Wire)
Less than two years ago, in October 2021, the average rate on a five year mortgage deal was just 2.55 per cent.
Inflation in the UK remains the highest in the G7 group of rich economies. The government said inflation figures were finally “moving in the right direction”. However, chancellor Jeremy Hunt said that “we aren’t complacent and know that high prices are still a huge worry for families and businesses”.
Some financial experts have predicted that the Bank of England could increase the base rate beyond 6.5 per cent by early next year – pushing up mortgage rates and pressure on homeowners.
Mark Harris of the SPF Private Clients mortgage broker said some lenders may start to reduce pricing if inflation continues to fall and swap rates – which lenders use to price their mortgages – begin to ease.
“There is a strong argument for the Bank of England to pause interest rate rises for now, giving the market time to settle down and adjust,” he said.
UK house price inflation in May this year was running at about one-seventh of the levels seen at the end of last summer – around £7,000 below a recent peak seen in September 2022, according to the official figures.
Source: independent.co.uk