Analysis from Moneyfacts found that while the Bank of England’s base rate had been cut by 1% since February last year, the average standard variable (SVR) rate had only fallen by 0.63% to 7.15%.
Further, the 0.25% reduction to the base rate in December has not been reflected in the average SVR, which has only dropped by 0.1% since the end of last year.
However, Moneyfacts found that average mortgage pricing was uncertain, as swap rates have risen recently and lenders reacted by increasing pricing. In the last week or so, HSBC, NatWest and Santander have been among those to raise mortgage rates.
As of 3 February, the two-year swap was 3.5%, up from 3.46% last month, and the five-year swap was 3.7%, up from 3.64%, according to data from Chatham Financial.
Average mortgage rates have fallen to 4.9% over the last 12 months and have been below 5% since the start of November.
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Reductions have been seen across multiple terms, as the two-, five- and 10-year fixed terms have decreased to 4.85%, 4.94% and 5.6% year-on-year.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said borrowers who were due a refinance would be encouraged by the falling fixed rates, but said wider uncertainty was impacting mortgage rate-setting.
Springall added: “Swap rates have been on the rise over recent weeks, which can lead to a pause in any substantial cuts by lenders. Some lenders may even increase rates, such as those who priced a bit too low last month, so now is a great time for borrowers to secure a low-rate deal if they need to refinance.
“Remortgage customers stand to benefit the most from refinancing this year – coming off the average SVR, they could save around £350 per month on their mortgage repayments, which is around £4,200 over 12 months.”
She said first-time buyers would be feeling more positive about getting on the property ladder this year, with relaxing stress rates and falling pricing, “but more affordable housing would really be a game-changer”.
Springall added: “The bad news this year will come to those who are coming off a cheap fixed rate mortgage from five years ago. While many could refinance up to six months in advance of their deal ending with their existing lender, seeking advice would be a wise choice to navigate other options across the mortgage maze.
“Borrowers will find the average rate on a five-year fixed mortgage is more than 2% higher than back in February 2021, when BBR was just 0.1%, so such cheap mortgages could not be sustainable. The mortgage market needs stability and innovation to support borrowers, such as modernising regulation, one of the key themes to be reviewed by the Financial Conduct Authority, laid out in its ‘Roadmap’ for the mortgage market.”
