Mortgage deals are unlikely to fall drastically in the months ahead, despite two-year rates dropping to their lowest level in two years.
Two-year fixes are at their lowest average rate in two years, having fallen by 0.14% in the past month to 5.18%., Moneyfacts research found.
Meanwhile, five–year rates currently stand on average at 5.10%, which is down from 5.48% since last May.
However Luke Williams from Pure Property Finance said: “Its great to see that property interest rates are slowly coming down, but I don’t think there will be any dramatic drops as we get to the end of the year – it definitely won’t reach the 2% mark that we had pre-Covid.
“There’s some optimism that rates might soften a little bit throughout the year, but it won’t be a dramatic drop. With inflation starting to ease ever so slightly, lenders are still pricing conservatively and are still reluctant to make any huge changes.
“The Bank of England base rate is a key driver in interest rates, we’ve started to see this come down consistently, with two members of the MPC most recently voting for a 0.5% cut. Mortgages may follow in the coming months; but won’t reach pre-pandemic levels for a long time.”
Williams added: “Some borrowers have opted to sit on variable/tracker rates as mortgage costs trend downwards; with the intention of switching to a fixed rate once the market plateaus.
“Others who need more payment security or higher lending would be more suited to a fixed rate. This offers a guaranteed monthly payment for a set term, regardless of what happens with BOE base rate.
“Each borrower’s scenario is different. It’s still important to still seek advice on what deal suits your scenario best.”
