At the end of December, the two-year swap rate dropped to 3.9 per cent while the five-year swap rate fell to 3.3 per cent. Subsequently, the first few days of 2024 have seen the likes of Leeds Building Society, Halifax and HSBC cut pricing, 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 per cent, down from 5.46 per cent a year ago. Meanwhile, the average five-year fixed mortgage rate stood at 5.02 per cent, down from 5.23 per cent 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 per cent 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 per cent compared to 5.16 per cent at the start of last year.
For a five-year fix at the same tier, the average rate is 4.44 per cent, compared to 4.92 per cent in 2023.
At the 75 per cent LTV tier, the average two-year fixed rate is 5.23 per cent while the average five-year fixed rate is 4.94 per cent. These are both slightly lower than last year’s average rates of 5.26 per cent and 4.99 per cent respectively.
The outlier was a two-year fixed deal at 85 per cent LTV, which stood higher at 5.55 per cent compared to 5.49 per cent last year. At the same tier, a five-year fixed rate now comes to 5.1 per cent, down from 5.25 per cent last year.
Pricing is also lower at higher LTVs, with the average two-year fixed rate at 90 per cent LTV at 5.69 per cent, down from 5.8 per cent and the average five-year fixed rate falling from 5.51 per cent in 2023 to 5.16 per cent in 2024.
At 95 per cent LTV, the average two-year fixed rate has dropped annually from 6.09 per cent to 5.81 per cent, while the average five-year fixed rate has come down from 5.77 per cent to 5.4 per cent.
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.”
