Fixed-rate pricing falls amid softer borrowing activity in May
UK mortgage rates fell further over the past week, with several lenders reducing pricing on fixed-rate deals. The average mortgage rate fell to 5.46% on Thursday, down from 5.50% the previous week and 5.59% a month earlier.
Both the average two-year and five-year fixed rates now stand at 5.51%, from 5.55% and 5.54% last week. This marks a notable decline from the peak reached at the start of April, when the average two-year and five-year fixes stood at 5.90% and 5.78% respectively.
Source: Moneyfactscompare.co.uk
Lenders revised their product ranges to include more competitive two- and three-year fixes, a move linked to easing inflation concerns and improved sentiment following peace talks between the US and Iran.
The Bank of England held the base rate steady at its latest meeting. This gave lenders scope to adjust pricing selectively, balancing funding costs against competition for new business, even as official figures pointed to weaker demand for mortgages overall.
Bank of England Money and Credit data showed net mortgage borrowing fell to £2.9 billion in May, down from £4.4 billion in April. Approvals for house purchases also moderated during the month, suggesting lenders used price cuts partly to stimulate flagging activity.
Rachel Springall (pictured right), finance expert at Moneyfactscompare.co.uk, said the recent easing in mortgage pricing volatility marked “a somewhat natural cooldown” after unrest caused by war in the Middle East.
“Mortgage rates have started to come down from their April peaks, so hopefully this will slowly build up momentum in the months ahead, and no doubt borrowers will be hoping for more stability in the market,” she added.
However, Springall pointed out that the Middle East situation remains fragile and could shift quickly, so anyone planning to take out a mortgage in the near future would be wise to monitor developments both at home and abroad closely.
For now, borrowers benefit from a window of lower two- and five-year fixed rates alongside a stable base rate, with the most competitive deals typically available to those at lower loan-to-value ratios.
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