Two-year mortgage deals are becoming increasingly competitive as rates fall faster than longer-term deals for the first time in two years.
It comes as the Bank of England yesterday voted to hold interest rates at five per cent, with policymakers signalling that they would take a “gradual” approach to lowering borrowing costs over the months ahead.
According to data provider Moneyfacts, Santander has become the first major lender to offer a two-year deal of less than four per cent.
It lowered its rate for home buyers with a 40 per cent deposit to 3.99 per cent, down from 4.28 per cent.
Five-year mortgage rates have been cheaper than two-year rates since September 2022, when Liz Truss’s mini-budget rocked the UK property market.
According to Rightmove, the average five-year fixed mortgage rate is now 4.61 per cent, down from 5.63 per cent a year ago, while the average two-year fixed mortgage rate is now 4.98 per cent, down from 6.16 per cent a year ago.
With markets expecting the Bank of England’s rate-cutting cycle to accelerate over the next two years, lenders have picked up the pace of rate reductions.
Nationwide, HSBC, TSB, NatWest, and Virgin Money have all cut rates in the past week.
Matt Smith, Rightmove’s mortgage expert said: “We’re still expecting two rate cuts before the end of the year, and home-movers should continue to see a downward trend in mortgage rates this side of Christmas.
“Overall, I think there’s an optimistic mood about where we’re heading, and lowering mortgage rates is supporting the increased home-moving activity we’re seeing right now, particularly against last year.”
Kevin Roberts, managing director of Legal & General Mortgage Services, said: “The mortgage market remains primed for a strong final quarter. We are seeing the return of sub-four per cent mortgage products for the first time since April, and supply is increasing, with the average number of available homes per estate agent at its highest since 2014.”