5-year fixed-rate mortgage deals drop below 5%

Mortgage rates for 5-year fixed deals have fallen below 5% for the first time in nearly two months with competition intensifying between lenders as they fight to hit end-of-year targets. Signs of a downward trend became noticeable following last week's autumn statement.

Why have mortgage rates been going up?

At the end of September, mortgage interest rates spiked following former Chancellor Kwasi Kwarteng's now infamous mini-budget. It included a number of tax cuts and increased spending, which had not been independently scrutinised by the Office for Budget Responsibility (OBR).

Record inflation figures also led to the Bank of England increasing the base rate of interest to 3.00%. As a result of economic uncertainty, lenders reacted quickly, withdrawing a number of products from the market before returning with much higher interest rates for both new mortgage applicants and those seeking to remortgage.

Best 2-year and 5-year fixed-rate mortgage deals

This week sees the first significant glimpse of mortgage interest rates reducing since they peaked on 20 October 2022. Retail financial data provider, MoneyFacts, reported that at their peak, 5-year and 2-year fixed rates averaged 6.65% and 6.51% respectively. Today the same rates are averaging 6.13% and 5.95%.

Furthermore the best 5-year fixed rate deals dropped below 5% this week. Many lenders issued revised rates for a significant number of mortgage products over the last few days while others are poised to join them.

5-year deals with a 60% loan-to-value (LTV) include Platform Mortgages at 4.89%; Virgin Money and Yorkshire Building Society, both at 4.93% while Nationwide offers a rate of 4.99% to join the lenders with rates below 5%. Those looking for an 80% LTV deal will be encouraged to see that Skipton Building Society is offering a rate of 4.98%.

You can find the best mortgage rates easily using our Mortgage Rate Comparison Tool which provides the best rates from across the market.

Should you fix your mortgage rate?

With around 100,000 borrowers approaching the end of their current fixed-rate mortgage deals each month, many will be wondering whether they should fix their mortgage now. The market is pricing in further increases to the base rate over the next year and is likely to peak at around 4.6% by mid 2023, which is lower than the best 5-year fixed-rate mortgage deals available now.

If you are concerned about how high interest rates might go and are worried about keeping up your mortgage repayments, then you should consider fixing your mortgage now. Alternatively, now might be a good time to consider a tracker mortgage, especially as the best 2-year tracker rate currently sits at 3.29%. Speaking to a mortgage specialist will ensure you get valuable independent advice and can secure the best mortgage rates for your own circumstances. If you don't have a mortgage adviser, consider using an online mortgage broker such as Habito*. Alternatively, you can get a free mortgage review* from a vetted FCA regulated mortgage adviser with Unbiased.

 

 

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