Home Estate Planning Two-year mortgage rates have biggest monthly drop since 2022 as Santander is latest to cut

Two-year mortgage rates have biggest monthly drop since 2022 as Santander is latest to cut

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Average two-year fixed mortgage rates have seen their biggest monthly drop since December 2022, according to a financial information website, despite mounting economic uncertainty squeezing lenders’ margins.

Figures from Moneyfacts showed the average two-year rate was 5.56 per cent at the start of February, down from 5.93 per cent in January – the biggest monthly fall in more than a year.

Meanwhile, average five-year fixed mortgage rates ticked down 0.37 per cent to 5.18 per cent.

Rachel Springall, finance expert at Moneyfacts, said: “There have been big expectations for fixed rates to fall further, and whether now is the right time to refinance will come down to an individual’s circumstances.

“Lenders are in constant review of their ranges, and it is likely rates will fluctuate in the coming weeks due to the noises surrounding future rate expectations.”

Despite reductions in fixed rates seen over the last few months, around 1.6m borrowers with even cheaper deals that expire this year face a steep rise in costs when they remortgage.

Some of these borrowers might currently be sitting on their lender’s standard variable rate (SVR), which is 8.17 per cent on average as of the start of February.

Springall added: “The average two- and five-year fixed rates are much lower than the average SVR. Seeking advice from an independent broker is wise to work out if an individual could save a decent sum on their monthly repayments by changing their mortgage deal.”

Moneyfacts’ data also showed that average two-year rates for first-time buyers, involving a five per cent deposit, had fallen below six per cent for the first time since last May, while product choice had increased.

Santander has today become the latest big lender to announce rate cuts of up to 0.16 per cent for existing customers.

The moves comes despite an uptick in SONIA swap rates – which reflect long-term predictions for the Bank of England’s base rate. The rise in swap rates has narrowed lenders’ margins to offer better deals.

Justin Moy, managing director at EHF Mortgages, told Newspage that Santander’s decision was “surprising”.

“While the savings are small, this is more about reversing those recent increases and will give borrowers renewed confidence,” he said. “We’re currently in a yo-yo mortgage market.”

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