MORTGAGE rates have recorded their biggest monthly reductions since October 2024, according to a new report by Moneyfacts, but brokers warned that rising tensions in the Middle East could see the recent trend of cuts paused and even reversed.
Moneyfacts says the average two- and five-year fixed rates have fallen by 0.16% and 0.11% respectively, with both reaching 5.52%, their lowest points since the start of March 2026.
It says the downward trend edges the rates away from inversion, where the two-year average rate has been priced higher than the five-year rate for three consecutive months (April to June).
The Moneyfacts Average New Mortgage Rate fell by 0.12%, to 5.47%, its biggest monthly fall since March 2025 (0.12%). It was last below 5% in March 2026 (4.90%).
Encouragingly, the report revealed that the average five-year fixed rate at 95% loan-to-value (LTV) has dipped below 6% for the first time since March 2026.
It added that mortgage availability increased for a third consecutive month, with product choice rising by 45 deals to 7,177 options. The market continued its recovery from the severe withdrawals caused by unsettled markets due to the conflict in the Middle East. However, it said there are still 307 fewer deals compared to the start of March 2026.
Meanwhile, mortgage product churn continued throughout June, with the average shelf-life of a deal now standing at 14 days, one day fewer than the month prior.
Rachel Springall, Finance Expert at Moneyfacts, said: “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.
“Lenders responded positively to falling swap rates in June, seeing notable drops to the average two- and five-year fixed rates by 0.16% and 0.11% respectively, both settling at 5.52%. The last cuts of a similar scale came in October 2024, when the rates dropped by 0.16% and 0.13% respectively.
“It has been three months since fixed rates inverted, where the two-year fixed has been higher than its five-year counterpart. However, this has started to unwind, so the rates should hopefully start to fall back into a more traditional pricing structure.
“However, this positive trajectory could be thrown off course, as renewed escalation in geopolitical tensions could slow the tempo of mortgage rate cuts.
“Mortgage product choice recovery from the steep drops seen back in April may have slowed, with an uplift of 45 options since the beginning of June, but it is the combined total of 976 deals returning since the start of May that calls for celebration. This equates to around three-quarters (76%) of mortgage deals coming back of the 1,283 products withdrawn in April.
“Borrowers with just a small deposit or equity of 10% may be pleased to know that further recovery of product choice at 90% LTV has surpassed 900 options for the first time since the start of March 2026.
“However, there is still room for improvement across the higher LTV terms, particularly for borrowers who can only amass a 5% deposit; these deals make up just 8% of the core market (5,848).”
Brokered welcomed the findings but said lenders will be closely watching the situation in the Middle East.
Shaun Sturgess, Director at Swansea-based Sturgess Mortgage Solutions, said: “Mortgage rates have been falling but sadly tensions in the Middle East are rising, with the US targeting military installations in Iran overnight and Iran claiming to have struck bases with US links in the region.
“Markets and lenders alike will be watching events in the Middle East closely and there is every prospect rates could rise again this week if we see further escalation.
“As ever, the message to borrowers is do not assume rates will continue to fall, as conditions remain volatile. Too many borrowers attempt to time the market and, at present, that is a high risk strategy.”
Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, added: “In recent weeks, mortgage rates have been falling but the conflict in the Middle East is once again heightening and borrowers should have this firmly on their radars.
“2026 has been a textbook example of how quickly mortgage rates can react to geopolitical events and a continued fall in rates should not be taken for granted.”
Omer Mehmet, Managing Director at Welling-based Trinity Finance, added: “The latest Moneyfacts data contains many positives but the concern is the backdrop of events in the Middle East, which has the potential to end the current run of falling rates and once again see lenders enter defensive mode.
“The cuts we’ve seen of late may not continue if tensions escalate, despite the fact that lenders are keen to make up for a quiet first half of the year.”
