Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:

“Borrowers will no doubt be thrilled to see mortgage rates drop, particularly the millions due to come off a cheap fixed rate before the year is over. It is a notable milestone to see the Moneyfacts Average Mortgage Rate drop below 5%, although it remains uncertain on how long this can be sustained. It has been over a month since the rate last fell below 5%, (3 September – 4.99%), before then, the rate had not dipped below 5% since September 2022. Mortgage rates escalated in the aftermath of the infamous ‘mini-Budget’, with the Moneyfacts Average Mortgage Rate breaching 5% just one week afterwards. The situation for borrowers seeking a new deal only got worse as, by October, the rate rose above 6%.

“The enduring uncertainty in the aftermath of the ‘mini-Budget’ led to not only a rise in rates, but lenders pulled hundreds of deals from sale. The closest comparison to such upheaval was felt due to the COVID-19 pandemic and UK lockdown. To further pinch consumers, inflation rose to double digits and the Bank of England Base Rate rose to 5% by late June 2023. As a result the Moneyfacts Average Mortgage Rate breached 6% again.

“Fast forwarding to the present day, mortgage rates are much lower thanks to base rate cuts and swap rate movements. However, sticky inflation makes it less likely for the Bank of England’s Monetary Policy Committee to unanimously agree on making more cuts. In addition, uncertainty remains surrounding what may be revealed within the Budget. That said, fixed rate mortgages do not always bend to the will of base rate cuts, and instead are more intrinsically linked with swap rates. Borrowers keen to refinance would be wise to seek advice to secure a new deal and not wait around for more rate cuts by the Bank of England.”

Key dates: The ‘mini-Budget was held on 23 September 2022. The Moneyfacts Average Mortgage Rate was 4.71% on this day, it then breached 5% to hit 5.10% on 30 September, and two weeks later it breached 6% to hit 6.03% by 8 October 2022. It then took over a month for the rate to fall below 6%, to stand at 5.94% on 22 November 2022. After several Bank of England Base Rate rises, and swap rate movement, the Moneyfacts Average Mortgage Rate rose once again to breach 6%, to stand at 6.01% on 24 June 2023. It did not dip below 6% until 17 November 2023, to stand at 5.98%, it has not risen above 6% since.

Methodology of the Moneyfacts Average Mortgage Rate can be found on our group website – click here for more.