Lenders also added 45 products to take the total choice to 7,177, continuing the recovery from the wave of withdrawals triggered by Middle East tensions in the spring, though the market still has 307 fewer deals than at the start of March.
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“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,” said Rachel Springall, finance expert at Moneyfacts.
She cautioned, however, that “renewed escalation in geopolitical tensions could slow the tempo of mortgage rate cuts”, noting that the unwinding of the rate inversion – with two‑year fixes dropping back towards their usual position of being cheaper than five‑year deals – could yet be knocked off course.
For borrowers on the ground, the headline is simple: new fixed‑rate mortgages are costing less, and the choice of deals is improving.
The more technical story about “inversion” boils down to the amount of interest charged for certainty of fixed payments over a longer period of time. For three months, five‑year fixes were cheaper than two‑year fixes, an unusual situation that suggested markets believed interest rates would fall quite sharply over the medium-term.
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With both averages now level at 5.52%, the anomaly of the “bargain” on five-year deals is fading. The decision between two and five years is sliding back towards the standard trade‑off: shorter deals that are less expensive but leave you exposed sooner to whatever happens next with interest rates, versus longer deals that are dearer but buy peace of mind.
Yet the warning flag from Moneyfacts on geopolitical risk – particularly the breakdown of the US‑Iran ceasefire and resulting oil price spike – is a reminder that cheaper mortgages depend on inflation continuing to cool.
Higher oil prices tend to feed through into dearer fuel, transport and some goods and services, putting upward pressure on headline inflation. If that keeps inflation elevated or slows its decline, central banks may have to hold interest rates higher for longer, or cut more cautiously, than markets had previously assumed.
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In that scenario, the current “normalisation” of the mortgage market – with rates drifting down and pricing structures returning to something more familiar – could come to a halt.
In other good news for low‑deposit buyers, Moneyfacts further reported that the average five‑year fixed rate for products at a 95% loan-to-value (LTV) ratio has slipped below 6% for the first time since March, while product choice at 90% LTV has climbed to more than 900 options, returning to levels last seen at the start of March.
Even so, deals for borrowers with only a 5% deposit still account for just 8% of the core market, underlining that access remains tight for first‑time buyers.
Also, standard variable rates (SVRs) remain far above those of for new fixed-rate borrowers. According to Moneyfacts, the average SVR now stands at 7.13%, down from 7.42% a year ago but still well above the 5.5% level available to new borrowers.