The average UK mortgage rate has dipped below 5% for the first time in over a month, signalling renewed competition among lenders and tentative relief for homeowners facing remortgage deadlines before the end of the year.
According to data from Moneyfactscompare.co.uk, the Moneyfacts Average Mortgage Rate – a benchmark measure across the market – has fallen 4.99%.
The drop marks a notable milestone in a volatile two-year period that has seen mortgage pricing surge and retreat in line with broader economic shifts.
The Moneyfacts rates last fell below 5% in early September, but before that had not been at this level since September 2022, shortly before the fallout from the “mini-Budget” sent borrowing costs sharply higher.
INFLATION EXPECTATIONS
The turmoil that followed saw lenders withdraw hundreds of products, and the average rate climb above 6% by October 2022.
Although conditions have stabilised since, the market remains sensitive to monetary policy and inflation expectations.
Recent base rate cuts by the Bank of England and softening swap rates – which influence fixed mortgage pricing – have contributed to the latest decline. However, further reductions are far from guaranteed amid concerns that inflation remains stubbornly high.
WELCOME NEWS
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said the fall below 5% would come as welcome news to the millions of borrowers whose fixed-rate deals are due to expire before year end.
But she warned that the current reprieve might not last if economic uncertainty persists or swap rates turn upward again.
She said: “Sticky inflation makes it less likely for the Bank of England’s Monetary Policy Committee to unanimously agree on making more cuts. In addition, uncertainty remains surrounding what may be revealed within the Budget.
“That said, fixed rate mortgages do not always bend to the will of base rate cuts, and instead are more intrinsically linked with swap rates.”
DOUBLE-SIDED CHALLENGE
Mary-Lou Press, president of NAEA Propertymark, said: “It’s extremely positive to see a far more competitive lending market than only 12 months back.
“Consumers have faced a doubled-sided challenge in recent years with elevated inflation and heightened base rates.
“Although we have seen three base rate cuts throughout the year to date, affordability has remained challenging for many. It will be a case of all eyes on the Bank of England on Thursday, as the next base rate decision is made.
“Also, with strong rumours of a potential overhaul for those in England and Northern Ireland regarding Stamp Duty, there will be close watch on the chancellor, as fiscal plans for the forthcoming year are shared within the Autumn Budget in only a few weeks time too.”
