After six consecutive weeks of mortgage rate reductions – and the expectation of more soon – there are hopes of sub-5.0 per cent two year fixed rates before year end.

Rightmove’s Matt Smith says: “Over this six week period we’ve seen average 5-year fixed mortgages fall by 0.42 per cent while two year fixed rates are down by 0.33 per cent. 

“More stability in the mortgage market after a topsy-turvy few months earlier in the year is a good thing for home movers, particularly as it means we are seeing lenders continuing to actively compete for business.”

He says the average five year fixed rate is now 5.69 per cent, up from 4.02 per cent a year ago; meanwhile the average two year fixed mortgage rate is now 6.28 per cent up from 4.02 per cent a year ago.

The average 85 per cent LTV five year fixed mortgage rate is now 5.73 per cent up from 3.99 per cent a year ago; and the average 60 per cent LTV five year fixed rate is now 5.33 per cent, from 3.72 per cent a year ago.

The average monthly mortgage payment on a typical first-time buyer type property when taking out an average five-year fixed, 85 per cent LTV mortgage, is now £1,193 per month, up from £1,002 per month a year ago.

So what chance of sub-5.0 per cent two year fixed rates before year end?

“From the enquiries we are receiving, we think that there is plenty of buyer demand in spite of current fixed rate levels. However, a two year fixed starting with a 4 by the end of the year would bring much-needed confidence to the UK mortgage market” explains Gary Bush of Mortgage Shop.

“The two year fix is popular at the moment given the expectation that we have seen the peak in mortgage rates and these may be reduced to the four to five per cent zone where they will likely settle. Swap rates will continue to fall if the Bank of England raises base rate by the expected 0.25 per cent this month, but anything more and mortgage rates could rise again. The most important figures will inflation data, which should set up the direction of travel for rates for the remainder of the year” suggests Stephen Perkins of Yellow Brick Mortgages. 

And finally Elliott Benson of Sett Mortgages adds: “Two year fixes need to be four per cent or below to truly kickstart the property market, but that’s unlikely to happen before the end of the year. However, if five year fixed rates go back to the high threes, then that could also be a trigger and inject some life into the market.”