Moneyfacts UK Mortgage Trends Treasury Report data highlights that both the average two-year fixed rate and the two-year variable rate have fallen to their lowest point on Moneyfacts records, defying economic indicators.

Charlotte Nelson, Finance Expert at Moneyfacts, said:

“While the average two-year fixed rate had stalled in recent months, it has fallen by 0.04% from June, so it appears that the trend of falling rates is now back on track. The fall in both the fixed and variable sector comes at an interesting time. Given mounting inflation and the Bank of England hinting at a base rate rise, falling rates are the last thing many would have expected.

“The base rate debate has dominated the headlines in the past few weeks, which has had a knock-on effect on the interest SWAP rate, causing the two-year SWAP rate to rise from 0.53% at the start of June to 0.68% in July.

“Recently, the savings market has also seen a boost. This, alongside the rising SWAP rates, has historically resulted in mortgage rates rising, but these influences are currently having little effect on mortgage rates, which are still on a downward trajectory.

“The downward trend can largely be explained by the intense competition amongst lenders looking to offer the best possible deals in the market. Lenders are perhaps starting to feel the pressure of an increased number of their customers sitting on their Standard Variable Rate, knowing that if the Bank of England decides to increase rates, a substantial chunk of their mortgage book could move to another provider almost overnight. This may be the catalyst that is keeping rates low, as providers aim to lock customers into a deal with them.

“Though rates are still falling for now, borrowers will not necessarily need to see a base rate rise for rates to start to increase, as there will come a point where the only way to go from another record low is up. Borrowers sitting on their SVR or coming to the end of their deal may be wise to consider a low fixed rate now, before it’s too late.”

The Moneyfacts UK Mortgage Trends Treasury Report provides an in-depth monthly review of today’s changing mortgage trends, including all the relevant facts on the UK’s residential and buy-to-let markets.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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