Biggest drop in mortgage rates since 2022

MORTGAGE rates recorded their biggest monthly drop in more than a year, bringing some relief for squeezed UK borrowers.

Rates on two-year fixed deals fell by 0.37pc in January in the biggest fall since Dec 2022, figures from Moneyfacts show. The average rate now stands at 5.56pc, down from 5.93pc at the start of January. It marks the sixth consecutive month of both two and five-year fixed mortgage rates falling.

The fall comes despite traders paring back bets on how often the Bank of England will cut rates this year. Rachel Springall from Moneyfacts said: “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.”

She added: “The recent observations made by the Bank of England would suggest base rate is unlikely to move for a few months yet.”

Underlining how jittery lenders are, Santander cut its rates yesterday while Natwest lifted them. Only three weeks after increasing its borrowing costs, Santander said it would lower the rates for borrowers looking to remortgage and buy-to-let landlords. The lender said residential borrowers would experience cuts of 0.05pc and 0.16pc, while rates for property investors would be reduced by 0.05pc and 0.16pc.

Banks’ borrowing costs have risen in recent weeks amid tempered hopes of imminent rate cuts, suggesting such decisions are in response to fierce competition in a sluggish property market.

Natwest said it would raise its tracker and fixed rates by as much as 0.25pc. Justin Moy, managing director of EHF Mortgages, said such changes show we are “in a yo-yo mortgage market”.

Elliot Culley, a director at Switch Mortgage Finance, said: “Rates are still predicted to fall over 2024 so there is no need to hit the panic button just yet.”