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Biggest drop in average two-year fixed mortgage rate on the market since 2022

The average two-year fixed mortgage rate on the market recorded its biggest month-on-month fall since December 2022 in February, according to a financial information website.

Across all deposit sizes, the average two-year fixed-rate mortgage had a rate of 5.56% at the start of February 2024, down from 5.93% at the start of January this year.

The 0.37 percentage point fall was the biggest monthly decrease recorded by Moneyfacts since December 2022.

Five-year fixed mortgage rates edged down from 5.55% to 5.18% on average, comparing the start of January 2024 with the start of February this year.

It is likely rates will fluctuate in the coming weeks due to the noises surrounding future rate expectations

Rachel Springall, Moneyfacts

Rachel Springall, a finance expert at Moneyfacts, said: “Borrowers searching for a new mortgage deal may be delighted to know fixed mortgage rates continued their downward trend, with the average two-year fixed rate dropping by its biggest margin since December 2022.

“Those borrowers who have waited patiently in recent months to re-finance, or indeed are preparing for when their mortgage deal expires, would be wise to review rates, as lenders are closely monitoring the volatile swap rate market, which tends to influence fixed-rate pricing.

“There have been big expectations for fixed rates to fall further, and whether now is the right time to refinance will come down to an individual’s circumstances.

“Lenders are in constant review of their ranges, and it is likely rates will fluctuate in the coming weeks due to the noises surrounding future rate expectations.”

Some borrowers may be sitting on their lender’s standard variable rate (SVR), while they decide what to do.

According to Moneyfacts, the average SVR at the start of February was 8.17%.

Ms Springall added: “The average two- and five-year fixed rates are much lower than the average SVR. Seeking advice from an independent broker is wise to work out if an individual could save a decent sum on their monthly repayments by changing their mortgage deal.”

Ms Springall said mortgage rates have also fallen in the first-time buyer bracket of the market.

She said: “The average two-year fixed-rate mortgage at 95% loan-to-value (LTV) has dropped below 6% for the first time since May 2023 (sitting at 5.84% at the start of February), much lower than six months ago, when it was just over 7%.

“Product choice has also increased at this LTV bracket.”

– Moneyfacts used data from the first available day of each month for its analysis.

Meanwhile, Nationwide revealed on Monday that the interest rate for some of its mortgages will be increasing this week.

The building society said that its mortgage rates would rise by up to 0.25 percentage points from Tuesday, although some will rise by much less.

First-time buyers and home movers will pay 4.49% interest for a two-year mortgage, while those remortgaging will pay 4.54%.

Nationwide said: “Swap rates, which are a key factor in mortgage pricing, have been rising and as a result we need to increase selected rates to ensure our rates remain sustainable.”

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