It comes as the average price for a home dropped by 0.1% to £271,079 compared with July, according to Nationwide Building Society.
UK households rolling off fixed-rated deals in 2025 will still face higher repayments than before, the Bank of England has warned. It comes as the average price for a home dropped by 0.1% to £271,079 compared with July, according to Nationwide Building Society.
In its latest Monetary Policy Report, the Bank explained that households looking to refinance are likely to encounter steeper monthly costs compared with their previous arrangements.
Robert Gardner, chief economist at Nationwide, said: “House prices are still high compared with household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.
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“Combined with the fact that mortgage costs are more than three times the levels prevailing in the wake of the Covid pandemic, this means that the cost of servicing a mortgage is also a barrier for many.”
Mark Harris, chief executive of the mortgage broker SPF Private Clients, said some lenders had begun to price their mortgage deals upwards.
“The mixed picture is down to rising swap rates, which underpin the pricing of fixed-rate mortgages, and lenders not wanting to offer the best rates during the summer months when staff are on holiday and resources are limited,” he added.
Elliott Jordan-Doak, a senior economist at Pantheon Macroeconomics, said the possibility of property tax rises in Rachel Reeves’s autumn budget had “the potential to throw sand in the gears of housing activity”.
Adam French, head of news at Moneyfacts, said the latest data was “more welcome news for borrowers” and said it showed lenders were “competing more aggressively”.
Commenting on the five-year mortgage rate drop, Mr French said: “The slow and steady fall in the cost of borrowing over the last year combined with strong average earnings growth has helped to marginally boost affordability for many homeowners and homebuyers.”
However, he thinks the latest inflation reading of 3.8 per cent has effectively stopped the chance of seeing another base rate cut in 2025.
“As a result, a few modest mortgage rate reductions are the best borrowers can probably hope for in the short term as lenders adjust to prospect of higher rates for longer,” Mr French added.
