Two-year mortgage deals the lowest they’ve been since 2022 – but will they remain?
New research from Moneyfacts has shown that two-year mortgage deals are at the lowest they’ve been in two years and have also fallen to their biggest margin in over six months.
The current average mortgage according to research is at 5.18%, having fallen by 0.14% in the past month.
Meanwhile, five–year rates currently stand on average at 5.10%, which is down from 5.48% since last May.
However, the question is; will interest rates go down? Property expert, Luke Williams from Pure Property Finance, discusses whether this may or may not be the case for the remainder of 2025.
Why have rates changed?
“Firstly, it’s good to look at what exactly is driving this drop. Swap rates have eased, which means lenders can now pass reductions onto borrowers. This was previously held off until rates were a bit more stable.
Base rate cuts also sparked fresh lender competition – typically, when one lender cuts some rates, you start seeing this move across other lenders too as they don’t want to have a lower uptake compared to competitors.
For some lucky people, this even prompted some deals to fall below 4% this year, especially for those paying a higher deposit.”
Will there be any more changes in 2025?
“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.”
Should buyers lock in a fixed-rate deal?
“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.”
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