Biggest fall in average two-year fixed mortgage rates since 2022

The average two-year fixed mortgage rate on the market saw its biggest month-on-month fall since December 2022 in February, according to Moneyfacts.

The average two-year fixed-rate mortgage had a rate of 5.56% at the start of February 2024, down from 5.93% at the start of January this year. This 0.37% fall was the biggest monthly decrease recorded by the financial information website since December 2022.

The data shows that average mortgage rates on the overall two- and five-year fixed rate deals fell for a sixth consecutive month.

The overall average two- and five-year fixed rates fell between the start of January and the start of February, to 5.56% and 5.18% respectively. The average two-year fixed rate stands 0.38% higher than the average five-year equivalent.

The average ‘revert to’ rate or Standard Variable Rate (SVR) fell slightly by 0.01%, to 8.17%, while the average two-year tracker variable mortgage remained at 6.15%.

Product choice overall fell month-on-month, for the first time since July 2023, to 5,787 options. However, the availability of deals at the 95% loan-to-value tier (274) has increased to the highest level since September 2022 (274).

In addition, the average shelf-life of a mortgage product rose to 28 days, the highest figure since February 2023 (28 days).

Mortgage market analysis
Feb-22 Feb-23 Aug-23 Jan-24 Feb-24
Fixed and variable rate products Total product count – all LTVs 5,356 4,341 5,056 5,899 5,787
Product count – 95% LTV 335 149 226 270 274
Product count – 90% LTV 735 539 586 733 681
Product count – 60% LTV 560 606 513 682 640
All products Shelf-life (days) 42 28 13 21 28
All LTVs Average two-year fixed rate 2.44% 5.44% 6.85% 5.93% 5.56%
Average five-year fixed rate 2.71% 5.20% 6.37% 5.55% 5.18%
95% LTV Average two-year fixed rate 3.05% 5.99% 7.10% 6.21% 5.84%
Average five-year fixed rate 3.35% 5.53% 6.41% 5.62% 5.36%
90% LTV Average two-year fixed rate 2.61% 5.66% 6.81% 5.94% 5.61%
Average five-year fixed rate 2.96% 5.14% 6.23% 5.65% 5.32%
60% LTV Average two-year fixed rate 1.82% 5.04% 6.62% 5.41% 5.06%
Average five-year fixed rate 2.06% 4.96% 6.16% 5.06% 4.70%
All LTVs Standard Variable Rate (SVR) 4.46% 6.84% 7.85% 8.18% 8.17%
All LTVs Average two-year tracker rate 1.70% 4.39% 6.02% 6.15% 6.15%
Data shown is as at the first available day of the month, unless stated otherwise.
Source: Moneyfacts Treasury Reports

Rachel Springall, finance commentator at Moneyfacts, said: “Borrowers searching for a new mortgage deal may be delighted to know fixed mortgage rates continued their downward trend, with the average two-year fixed rate dropping by its biggest margin [0.37%] since December 2022. Those borrowers who have waited patiently in recent months to re-finance, or indeed are preparing for when their mortgage deal expires, would be wise to review rates, as lenders are closely monitoring the volatile swap rate market, which tends to influence fixed rate pricing. 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.

“The recent observations made by the Bank of England would suggest base rate is unlikely to move for a few months yet, and indeed the Monetary Policy Committee will wait for firm evidence that inflation is under control before even considering a rate cut. Borrowers who are sitting on their Standard Variable Rate (SVR) should be incentivised to switch their mortgage if they can, as it’s unlikely they will see their repayments drop for the foreseeable. Indeed, 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.

“Those borrowers who are looking to get on the property ladder as a first-time buyer may be pleased to know rates have come down month-on-month. Indeed, the average two-year fixed rate mortgage at 95% loan-to-value has dropped below 6% for the first time since May 2023 [5.94%], much lower than six months ago, when it was just over 7%.

“Product choice has also increased at this LTV bracket and, while it’s a slight improvement month-on-month, it is encouraging and demonstrates lenders are still keen to support borrowers with small deposits. However, we have seen some product availability drop around other higher LTV brackets, at 90% and 85% month-on-month, so it will be interesting to see whether there will be further declines in these areas over the next few months, or if it’s a short-term adjustment.

“Lenders are actively reviewing their ranges, so product choice could remain volatile, but borrowers must be quick to check deals as the average shelf-life stands at 28 days, the highest in a year.”

 

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