The average two-year fixed mortgage rate has fallen from 5.68% to 5.52%, meaning someone borrowing £250,000 over 25 years on a repayment mortgage would pay around £24 less each month, saving nearly £290 a year.
Sharpest Monthly Fall Since October 2024
The reductions represent the sharpest monthly fall in fixed mortgage pricing since October 2024, offering renewed encouragement to buyers and homeowners. The average five-year fixed deal also fell by 0.11 percentage points, leaving both products with an average rate of 5.52%.
The average rate across all newly available mortgages declined by 0.12 percentage points to 5.47%, marking the biggest monthly reduction since March 2025, although borrowing costs remain above the sub-5% levels seen earlier this year.
Driven by Falling Swap Rates
The improvements have been driven by falling swap rates, which determine the cost of fixed-rate lending for banks and building societies. Borrowers with smaller deposits also benefited from the latest round of reductions.
For buyers purchasing with a 5% deposit, the average five-year fixed mortgage at 95% loan-to-value dipped below 6% for the first time since March, while the average two-year fixed rate at the same loan-to-value fell to 6.13%.
Mortgage Choice Improves
Choice has also continued to improve after the disruption seen earlier this year. The number of mortgage products available increased by 45 over the past month to 7,177, marking the third consecutive monthly rise. Since May, 976 mortgage products have returned to the market after more than 1,200 deals disappeared during the period of volatility triggered by conflict in the Middle East.
Rachel Springall, finance expert at Moneyfacts, said: "Borrowers will breathe a sigh of relief to see fixed mortgages falling at their fastest pace for almost two years, combined with a calmer period of product churn and an uplift in choice."
She added: "Lenders responded positively to falling swap rates in June, seeing notable drops to the average two- and five-year fixed rates by 0.16% and 0.11% respectively, both settling at 5.52%."
Risks Remain
However, Springall warned: "This positive trajectory could be thrown off course, as renewed escalation in geopolitical tensions could slow the tempo of mortgage rate cuts."
She said the recovery in mortgage choice had also been encouraging, with 976 products returning to the market since May, representing around three-quarters of the mortgage deals withdrawn during April's market disruption.
Despite the improving outlook, homeowners who fail to switch when their current deal expires could still face substantially higher borrowing costs. The average standard variable rate remains 7.13%, meaning borrowers who do not remortgage at the end of a fixed deal could see their monthly repayments rise sharply.
Springall said affordability continued to weigh on buyer confidence, but argued lenders should keep developing products aimed at helping first-time buyers onto the housing ladder. She also called for changes to stamp duty thresholds for first-time buyers to reduce the upfront cost of purchasing a home.
