Lenders announced further reductions in UK mortgage rates yesterday, with more cuts set to follow, as new data reveals the number of mortgage options for borrowers has risen to its highest level since February last year.

The latest cuts come after comments by Bank of England governor Andrew Bailey last week suggested that the UK could avoid further rate rises.

“There’s been a bit of a shift in markets over the last week or so,” said Aneisha Beveridge, head of research at estate agency Hamptons. “Since Andrew Bailey came out with his comments, swap rates [used by banks price mortgage deals] are down a little bit.”

Last week, Bailey told MPs that interest rates, which currently stand at 5.25% after 14 consecutive rises, were “much nearer” to the top of the cycle.

The Bank of England is expected to increase base rates by another quarter point next week but investors are split on whether there will be one further rate rise before the end of the year.

Rightmove’s mortgage commentator Matt Smith commented: “There’s a widely held view that the Base Rate is now nearing its peak which led to a fall in swap rates falling towards the end of last week, and this could mean we see lenders make more significant mortgage rate cuts in the next few weeks. Swap rates have also responded reasonably positively to today’s unemployment figures and pay growth data.

“All eyes will now look to the upcoming inflation figures, which are likely to have an impact on the next Bank of England Base Rate decision. As long as the news is in line with market expectations, it’s possible that rate reductions will start to gather pace, and we could see sub-5% rates return to the market for the first time since the end of June.”

The average price of a two-year fixed mortgage yesterday was 6.66%, according to Moneyfacts, down from 6.85% at the start of August, which was the highest level since 2008.

But average borrowing rates remain above the levels they reached in the immediate aftermath of last year’s disastrous “mini” Budget.

Rachel Springall, finance commentator at Moneyfacts, said: “Mortgage product choice has grown to its highest level since February 2022 and average rates are gradually falling. This positive momentum has resulted in the average shelf life of a mortgage product rising to 15 years, up from a record low of 12 days in July.”

She added: “It will be interesting to see how the mortgage market improves in the weeks to come, particularly if SWAP rates fall, as lenders may then cut their fixed rate deals as a result. As we have seen before, a volatile interest rate market can have a significant impact on lenders’ pricing strategies.”