Average fixed-rate mortgages have fallen to their lowest point since March, offering a ray of sunshine in the current economic climate.

According to the latest data from Moneyfacts, the average two-year fixed-rate deal has dropped by 18 basis points since July, now sitting at 5.77%. Five-year fixed-rate deals have also seen a welcome decrease, falling by 15 basis points to 5.38%.

This marks the first time in five months that these rates haven’t increased, bringing relief to borrowers after a period of steady rises.

Competition Heats Up, But Choice Remains Limited

While these falling rates are a positive sign, it’s worth noting that the average “shelf-life” of a mortgage product has plummeted to a mere 17 days, down from 30 days in June. This indicates a fiercely competitive market where lenders are rapidly adjusting their offers.

The total number of mortgage products available has remained relatively stable, with 6,657 options available at the start of August, just one fewer than the previous month.

Tracker Mortgages and Standard Variable Rates See Minimal Change

The average two-year tracker variable mortgage rate saw a small increase of one basis point, reaching 5.95% in August. Meanwhile, the average standard variable rate (SVR) experienced a slight dip of one basis point, settling at 8.16%. This remains just below the highest SVR recorded in November and December of last year, which reached 8.19%.

Expert Predicts Further Rate Drops on the Horizon

Rachel Springall, a finance expert at Moneyfacts, believes that mortgage rates are poised for further reductions in the coming weeks. This prediction is based on falling swap rates and the recent 0.25% base rate cut announced by the Bank of England – the first cut in over four years.

Limited Options for Borrowers with Smaller Deposits

Despite the overall increase in product choice during July, the number of mortgages available for those with smaller deposits (at higher loan-to-value ratios) has decreased.

The most significant drop was observed in the 80% loan-to-value bracket, where the number of available products decreased by 53, reaching its lowest point since March 2024. This news may be discouraging for those with limited deposits, like many first-time buyers. However, experts suggest that this trend might be temporary, with lenders potentially reassessing their offerings in the coming months.