Mortgage rates in the UK have reached their lowest levels since October 2022, driven by a competitive market among lenders. Analysts from Moneyfacts reported that the average two-year fixed mortgage rate fell to 4.86%, while the five-year fixed rate decreased to 4.85%. This marks a significant shift as rates had surged after the controversial mini-budget in September 2022.
Recent Mortgage Rate Trends
Last week, more than 20 banks adjusted their mortgage rates downward. The Bank of England is anticipated to lower its base rate from 4% to 3.75% during its upcoming meeting on December 18. This reduction would follow four previous cuts in the past year.
Adrian Anderson of Anderson Harris noted that falling swap rates indicate a greater market confidence in future base rate reductions. Swap rates—the costs banks pay to borrow from each other—directly influence fixed-rate mortgage pricing.
Rate Cuts and Competitiveness
- Over 24 banks announced mortgage rate reductions last week.
- Some lenders lowered their fixed rates by as much as 0.35 percentage points.
- Nationwide offered a two-year fixed rate as low as 3.58%, the best since September 2022.
Rachel Springall from Moneyfacts reported that the number of lenders making rate adjustments doubled compared to the previous week, emphasizing the competitive climate among financial institutions.
Among the notable adjustments, First Direct implemented the largest cuts, with reductions of up to 0.35 percentage points. Other lenders like Barclays and HSBC also made significant reductions.
Market Influences on Mortgage Rates
The UK housing market saw a decline in activity prior to recent budget announcements. David Hollingworth from L&C Mortgages explained that as buyer activity slowed, lenders became more aggressive in pricing to capture market shares.
With the expectation of further base rate cuts introduced in the chancellor’s recent budget, confidence among lenders has improved, reflecting positively on the mortgage landscape.
Overall, the shift in mortgage rates indicates a market poised for potential improvement, benefiting borrowers in a fluid financial environment.
