Average mortgage rates on two- and five-year fixed deals have fallen by 0.08% and 0.10%, to 4.86% and 4.91% respectively, and are now at their lowest points since September 2022, data from Moneyfacts has revealed.
It is the first time the average five-year fixed rate has dropped below 5% since May 2023, which one broker says is the “the moment market psychology flips”.
Moneyfacts says overall product choice has also risen month-on-month, to 7,054 options, close to a record-high — and that the drive to support borrowers seeking higher loan-to-value deals has been evident over the past 12 months.
Year-on-year deals at 95% LTV rose by 111 and those at 90% LTV rose by 155, while no other LTV tier has risen by more than 100 deals year-on-year.
Rachel Springall, Finance Expert at Moneyfacts, said: “The re-pricing by lenders led to the average five-year fixed rate dropping below 5% for the first time in over two years and sits at its lowest point since before the ‘mini-Budget’ in September 2022, alongside its two-year counterpart.
“Year-on-year, the mortgage market has seen an optimistic shift in the availability of products aimed at borrowers with a small deposit or equity, with almost 300 products added to the roster at 90% and 95% loan-to-value. The volume of deals at these tiers now rests at their highest counts since March 2008.
“The Government has been very vocal that it wants lenders to do more to support buyers to boost UK growth, so any improvement in high loan-to-value deals should be celebrated as it gives borrowers more choice as competition ramps up.”
Mortgage market psychology
Ranald Mitchell, Director at Norwich-based Charwin Mortgages, said: “Five-year fixes slipping below 5% is the moment market psychology flips.
A ‘4’ at the front turns hesitation into action, and lenders know it. Breaking that barrier signals real confidence and once one lender moves, the rest follow.
“With product choice exploding and high-LTV deals flooding back, this feels like the clearest turning point since the mini-Budget.”
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said rates are on a roll: “However poorly the Budget landed in November, mortgage rates have seen their best performance for some time, increasingly closing in on the 3.5% mark with many high street providers.
“With activity stalling whilst we all waited for the Budget roulette wheel to be spun, buyers are now in great shape to awaken from their hibernation, whilst those looking to remortgage will feel that festive cheer.”
Riz Malik, Director at Southend-on-Sea-based R3 Wealth, said lower mortgage rates come at just the right time: “For the 1.9 million fixed rate deals ending in 2026, this will come as welcome news as a new set of borrowers face the rate shock of higher monthly payments.
“From communications we have seen so far in December, lenders want to lend and they are keen for your business. If your deal is ending, start looking at your options as we don’t know what’s around the corner.”
Photo by Markus Winkler on Unsplash
