Homebuyers have been given a boost as fixed mortgage rates dropped for a consecutive month, with the biggest monthly reductions since October 2024, it has been revealed.
Moneyfacts data shows the average two- and five-year fixed rates as of the start of July have fallen by 0.16 and 0.11 percentage points respectively, with both reaching 5.52%.
It is their lowest point since the start of March 2026.
Rachel Springall, finance expert at Moneyfacts, (pictured), says: “Borrowers will breathe a sigh of relief to see fixed mortgages falling at their fastest pace for almost two years, combined with a calmer period of product churn and an uplift in choice.
It comes as mortgage rates have soared since the outbreak of the Iran war, hitting demand in the housing market.
Finance availability
Mortgage availability also increased for a third consecutive month, with product choice rising by 45 deals to 7,177 options.
The average two-year fixed rate at 60% loan-to-value (LTV) has fallen back below 5% at 4.97%, from 5.17% in June. In additional, the average five-year fix has dropped from 5.29% to 5.23%.
Borrowers with a limited deposit or equity of just 5% can also access lower rates. The average five-year fixed rate at 95% LTV has dipped below 6% for the first time since March 2026 at 5.92%.
The typical two-year fix at 95% LTV has also dropped from 6.23% to 6.13%.
However, Moneyfacts warns there are still 307 fewer deals compared with the start of March 2026.
However, buyers need to act fast.
Mortgage product churn continued throughout June, with the average shelf-life of a deal standing at 14 days, a day less than in May.
Temporary relief for mortgage borrowers
Springall, adds: “Lenders responded positively to falling swap rates in June, seeing notable drops to the average two- and five-year fixed rates.
Rates should hopefully start to fall back into a more traditional pricing structure.”
“It has been three months since fixed rates inverted, where the two-year fixed has been higher than its five-year counterpart. However, this has started to unwind, so the rates should hopefully start to fall back into a more traditional pricing structure.”
However, she warned that this positive trajectory could be thrown off course as renewed escalation in geopolitical tensions could slow the tempo of mortgage rate cuts.
Uncertainty remains in the mortgage market
Commenting on the data, Nathan Emerson, chief executive at Propertymark, says: “Any fall in mortgage rates should help boost flexibility for both buyers and sellers, and it could perhaps be a sign that the UK housing market is overcoming what may be the worst of the mortgage rate rises witnessed in recent years.
“However, with inflation figures due next week, all eyes will likely turn to the Bank of England and its next base rate decision at the end of the month. There has been speculation that we may see a rate rise over the coming months, which could shift sentiment among lenders as the year progresses.”
He added that the appointment of a new Prime Minister could also create uncertainty among buyers and sellers due to potential changes in housing policy going forward.
Emerson adds: “So, while the news is welcome, it is important to consider the wider economic picture and the many different scenarios that could play out over the coming weeks and months.”
