Borrowers could benefit from improving mortgage pricing as expectations of a December base rate cut strengthen, while savers may need to work harder to secure competitive returns, according to analysis from Moneyfactscompare.co.uk.
The Moneyfacts Average Mortgage Rate has fallen from 5.02% to 4.94% since inflation eased from its September peak of 3.8%.
Average 2-year fixed rates have dropped from 4.98% to 4.88%, and average fi5ve-year fixed rates from 5.02% to 4.93%, reflecting increased competition among lenders.
Moneyfactscompare said today’s inflation figures, slowing GDP growth and rising unemployment all support the likelihood of a December cut.
Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk, said: “Since inflation has fallen from this year’s peak of 3.8% during September, the Moneyfacts Average Mortgage Rate has fallen below 5%, which will come as a relief to many borrowers.
“There have been plenty of lenders dropping their fixed rate deals in recent weeks and by more significant margins, with more possibly on the way.
“A base rate cut in December is looking increasingly likely; with GDP growth slowing and unemployment rising, this has pushed swap rates near their 30-day lows and reflects the market’s confidence.
“However, if anything unexpected arises from the upcoming Autumn Budget, it could derail these chances.”
Mary-Lou Press, president of NAEA Propertymark, said the shift provides stability for households looking to secure new deals after a period of sustained volatility.
She said: “Falling inflation and the growing likelihood of a base rate cut will be welcome news for many households, particularly those looking to secure a new mortgage deal.
“After a prolonged period of higher rates, we are beginning to see greater competition among lenders, with average fixed rates edging downward.
“This provides a degree of stability and confidence for some buyers and homeowners who have been waiting for calmer conditions to move or remortgage. However, the broader economic picture remains mixed.
“Slowing GDP growth and rising unemployment underline the fragile nature of the recovery, and any unexpected measures in the Autumn Budget could still influence the direction of travel for mortgage pricing.”
Press said the environment also poses risks for savers as rates fall. She said: “The pressure on savers is also clear.
“With average savings rates now sitting below inflation, households are at real risk of losing money in real terms if they do not actively seek out competitive accounts.
“While a significant number of deals still outperform inflation, the downward trend in interest rates means these options may diminish quickly.
“At a time when budgets remain tight for many, it is crucial that consumers across the board, whether borrowing or saving, review their financial arrangements and shop around.
“Housing market stability depends not only on the affordability of mortgages but also on the financial resilience of households, and ensuring people can access competitive products is central to that.”
