Fixed mortgage rates in the UK have declined for a consecutive month, marking the largest monthly reductions since October 2024, according to data from Moneyfacts.
As of early July, the average two-year and five-year fixed rates both fell to 5.52%, representing drops of 0.16 and 0.11 percentage points respectively. This marks their lowest point since the beginning of March 2026.
The rate reductions follow a period of increased borrowing costs triggered by geopolitical tensions, which had dampened demand in the housing market.
Product availability increases
Mortgage product availability rose for a third consecutive month, with the total number of deals increasing by 45 to 7,177 options. However, this remains 307 fewer products than were available at the start of March 2026.
For borrowers with larger deposits, the average two-year fixed rate at 60% loan-to-value (LTV) fell from 5.17% in June to 4.97%, dropping below the 5% threshold. The average five-year fixed rate at the same LTV decreased from 5.29% to 5.23%.
First-time buyers with limited deposits also saw improvements. The average five-year fixed rate at 95% LTV fell below 6% for the first time since March 2026, reaching 5.92%. The two-year fixed rate at 95% LTV dropped from 6.23% to 6.13%.
Rachel Springall, finance expert at Moneyfacts, noted that lenders responded to falling swap rates in June. She added that the rate inversion, where two-year fixed rates exceeded five-year rates for three months, has begun to unwind.
The average shelf-life of mortgage products stood at 14 days in June, one day less than in May, indicating continued market volatility.
Market uncertainty persists
Nathan Emerson, chief executive at Propertymark, said the rate falls could provide flexibility for buyers and sellers, potentially signalling that the market has passed the worst of recent rate increases. However, he cautioned that upcoming inflation figures and the Bank of England’s base rate decision at the end of July would be critical factors.
Emerson noted speculation about a potential rate rise in coming months, which could shift lender sentiment. He also pointed to uncertainty created by the appointment of a new Prime Minister and potential changes to housing policy.
The improvements in affordability conditions come as the property market continues to adjust to economic pressures. While regional market dynamics vary across the UK, the mortgage rate reductions could support transaction levels in the coming months.
Outlook
Springall warned that the positive trajectory could be disrupted by renewed geopolitical tensions, which may slow the pace of further rate cuts. The combination of economic uncertainty, political transition, and external factors suggests that market conditions remain subject to rapid change despite the recent improvements in mortgage pricing.
