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Antony Antoniou – Luxury Property Expert

Mortgage Rates Drop Below 5% for the First Time Since July

Mortgage Rates Drop Below 5% for the First Time Since July


In a much-needed respite for potential homebuyers and homeowners alike, mortgage rates have dipped below the 5% mark for the first time in two months. This drop comes as positive signals emerge from the Bank of England regarding inflation, easing concerns about unexpected interest rate hikes. In this blog post, we’ll delve into the recent developments in the mortgage market and what they mean for you.

The Latest Deals

Yorkshire Building Society has taken the lead in offering a competitive rate, introducing a 4.99% five-year fixed-rate mortgage last Friday. This marks their most affordable deal since the end of June. Meanwhile, Coventry Building Society has also slashed its best value five-year deal to 5%. These reductions signal a promising trend for borrowers.

A Broader Trend

Over the past couple of months, the average two-year fixed-rate mortgage offered by the ten largest lenders has fallen from 6.25% to 5.9%, according to broker L&C. While the average across all five-year fixed-rate mortgages is slightly higher at 6.11%, as reported by analyst Moneyfacts.

Major players in the mortgage market, including Barclays, are taking advantage of the recent drops in market funds’ cost and have made further cuts to some of their fixed-rate offerings. For instance, Barclays reduced the rate on its five-year fixed-rate mortgage for buyers with a 40% deposit from 5.37% to 5.27%. Halifax and Nationwide have also joined in by reducing their mortgage rates this week.

Factors Behind the Drop

The recent decrease in swap rates, which directly impact mortgage pricing, has played a significant role in this rate reduction. Five-year swap rates dropped to 4.54% on Thursday, representing a 0.1 percentage point decrease in just two days and nearly 0.4 percentage points down compared to a month ago.

Furthermore, the expectation of lower future borrowing costs has led experts to predict that homebuyers may be able to secure a five-year fixed-rate mortgage at 4.5% by the end of October. As more lenders follow suit with rate cuts, this could become a reality.

Bank of England’s Positive Signals

Andrew Bailey, the Governor of the Bank of England, recently provided some encouraging insights. Speaking to MPs on the Treasury committee, Bailey noted that many economic indicators were signaling a continued decline in inflation for the remainder of the year. The consumer prices index fell to 6.8% in July, down from 7.9% in June.

The Bank of England is expected to raise interest rates one more time next week, from 5.25% to 5.5%. However, the signs that lenders will continue to bring down their mortgage rates offer a glimmer of hope for homeowners grappling with rising costs.

Challenges Remain

While the news of declining mortgage rates is undoubtedly positive, challenges persist in the housing market. Landlords’ mortgage arrears have more than tripled over the past year, from £4 million to £13 million, with some experts suggesting that the worst may still be ahead. Homeowners are not immune either, as mortgage arrears have doubled from £18 million to £38 million over the same period, according to the Financial Conduct Authority. The overall value of outstanding mortgage balances in arrears now stands at £16.9 billion, the highest total recorded since 2016.


The recent drop in mortgage rates below 5% is a welcome development for anyone considering buying a home or refinancing their existing mortgage. These reductions, driven by factors like lower swap rates and positive signals from the Bank of England, provide some relief in a housing market that has seen its fair share of challenges. As lenders continue to adjust their rates, it’s an excellent time for borrowers to explore their options and potentially secure a more affordable mortgage deal. However, it’s essential to remain cautious, as economic uncertainties and challenges in the housing market still loom large.

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