The new year has begun with a raft of cuts to mortgage rates with more expected, figures from a property portal firm showed.
At the end of December, the two-year swap rate dropped to 3.9% while the five-year swap rate fell to 3.3%. Subsequently, the first few days of 2024 have seen the likes of Leeds Building Society, Halifax and HSBC cutting mortgage rates, with the latter being the first high street lender to introduce a sub-four per cent rate.
The Rightmove weekly mortgage tracker showed that the average two-year fixed mortgage rate was now 5.43%, down from 5.46%t a year ago. Meanwhile, the average five-year fixed mortgage rate stood at 5.02%, down from 5.23% this time last year.
This has brought the average monthly mortgage payment paid by a typical first-time buyer from £1,129 last year to £1,104 currently. This is based on someone buying a home worth £219,984 with a five-year fixed mortgage on a 25-year term at 85% loan to value (LTV).
Rates drop across the board
Mortgage rates across most LTV tiers were lower than they were a year ago, such as the average two-year fix at 60 per cent LTV which is currently 4.82% compared to 5.16% at the start of last year.
For a five-year fix at the same tier, the average rate is 4.44%, compared to 4.92% in 2023.
At the 75% LTV tier, the average two-year fixed rate is 5.23% while the average five-year fixed rate is 4.94%. These are both slightly lower than last year’s average rates of 5.26%t and 4.99% respectively.
The outlier was a two-year fixed deal at 85% LTV, which stood higher at 5.55% compared to 5.49% last year. At the same tier, a five-year fixed rate now comes to 5.1%, down from 5.25% last year.
Pricing is also lower at higher LTVs, with the average two-year fixed rate at 90% LTV at 5.69%, down from 5.8% and the average five-year fixed rate falling from 5.51% in 2023 to 5.16% in 2024.
At 95% LTV, the average two-year fixed rate has dropped annually from 6.09% to 5.81%, while the average five-year fixed rate has come down from 5.77% to 5.4%.
More rate cuts in coming weeks?
Matt Smith, mortgage expert at Rightmove, said: “It looks like lenders are likely to give early 2024 movers the belated Christmas present of lower mortgage rates. After the reduction in swap rates we saw before the holidays, this is now starting to filter through to mortgage rates now that the festivities are over and the working year has begun.
“Unless things change, the signs are positive that lenders will reduce rates further over the coming weeks. Combined with the early-year bounce in homemover activity we’re starting to see, lenders who price more competitively can expect growing interest from those looking to take out a mortgage soon.”
