The best mortgage rates remain just above 3.5 per cent with lenders nervous to price any lower at present.
Typical rates on two and five-year fixed mortgages have been drifting downwards and first-time buyer rates have seen some improvements in recent weeks.
The vast majority of households, a fixed mortgage rate somewhere between 3.59 and 4.5 per cent should be easily achievable depending on the level of equity or size of deposit.
Fixed rate mortgage pricing is heavily influenced by where money markets expect interest rates to head in the future.
After voting to hold interest rates at its last meeting, the Bank of England looked likely to cut rates next month – although Iran-US tensions have thrown a spanner in the works.
Markets are still pricing in a rate cut, but are less certain now than they were last week. And lenders have already priced much of a predicted rate cut into their mortgage offers.
Mortgage borrowers could start to see fixed rate deals fall as the latest data on the UK economy suggests further cuts to the Bank of England base rate could be on the cards
> Best mortgage rates calculator: Check the deals you could apply for
Mortgage rates: What’s happening
The Bank of England opted to hold interest rates at 3.75 per cent in February, but a cut in March is thought likely – despite a spike in oil prices thanks to the Iran-US conflict.
In December, the bank cut interest rates from 4 per cent to 3.75 per cent, down from a high of 5.25 per cent the previous year.
The next decision will take place on 19 March, with the majority of analysts now expecting a cut to 3.5 per cent.
It’s fair to say the mortgage market is somewhat more settled now.
In 2023, a combination of base rate hikes and worries over inflation figures saw average two-year fixed mortgage rates reach a high of 6.86 per cent in the summer, according to Moneyfacts, while five-year fixed rates hit 6.35 per cent.
However, mortgage rates still remain far higher than borrowers had enjoyed prior to the surge in 2022.
Roughly four years ago, the averages were hovering around 2.5 per cent for a five-year fix and 2.25 per cent for a two-year.
Today the average two-year fix is 4.85 and the average five-year fix is 4.96 per cent.
As recently as October 2021, some of the lowest mortgage rates were under 1 per cent.
Will mortgage rates go down or up?
The current expectation is that the Bank of England will cut rates one or two times in 2026 to either 3.5 per cent or 3.25 per cent – but again, much depends on the geopolitical situation unfolding and what that could do to petrol prices, and in turn, the rate of inflation.
This expectation has fed through into Sonia swaps, an inter-bank lending rate which forecasts where mortgage rates will be in two or five years. Lenders use this to determine fixed-rate mortgage pricing.
Current swap rates suggest mortgage rates could fall slightly further – but not much.
As of 23 February, five-year swaps were at 3.53 per cent and two-year swaps were at 3.35 per cent.
Swaps will likely need to fall further for fixed rate mortgages to see any further dramatic falls from here.
Should you fix for two or five years?
Choosing what length to fix for depends on what you think may happen to interest rates but should importantly take more account of what your personal circumstances are.
David Hollingworth adds: ‘Two-year rates are now the cheapest deals, but borrowers need to think carefully about whether longer-term security would suit them better, rather than heading straight for the lowest rate.’
Key factors include whether you may move soon, how much you prefer the security of fixed payments for longer and how well you could cope with a rise in mortgage bills.
Fixed rates of any length offer borrowers certainty over what their payments will be from month-to-month.
Those opting for a shorter two-year fix are backing interest rates falling over the next couple of years, or at least staying steady, so that when it is time to remortgage their bills won’t rise.
With five-year fixes borrowers are locking in to rates that they know won’t change for longer, perhaps either because they believe rates may rise or because they prefer the security. Five-year fixes were hugely popular when rates were lower.
If rates continue to fall, a tracker mortgage without an early repayment charge could put borrowers in a position to take advantage.
However, for all the potential benefit, a tracker product will also leave people vulnerable to further base rate hikes, while also being more expensive than fixed rates at present.
Whatever the right type of mortgage for your circumstances, shopping around and speaking to a good mortgage broker is a wise move.
> Check the best mortgage rates based on your house price and loan size
What are the best mortgage rates?
We have taken a look at the best deals on the market based on a 25-year mortgage for a £290,000 property – the current average house price, according to the ONS.
The mortgage deals below are best in terms of having the lowest rate.
They may not be the cheapest deal overall when arrangement fees are also factored in.
Bigger deposit mortgages
Five-year fixed rate mortgages
First Direct has a five-year fixed rate at 3.75 per cent with a £490 fee at 60 per cent loan to value.
HSBC has a five-year fixed rate at 3.79 per cent with a £999 fee at 60 per cent loan to value.
Two-year fixed rate mortgages
Nationwide has a 3.59 per cent two-year fixed rate deal with £999 fee at 60 per cent loan-to-value.
Yorkshire BS has a two-year fixed rate at 3.6 per cent with a £995 fee at 60 per cent loan to value.
Mid-range deposit mortgages
Five-year fixed rate mortgages
First Direct has a five-year fixed rate at 3.84 per cent with a £490 fee at 75 per cent loan to value.
HSBC has a five-year fixed rate at 3.85 per cent with a £999 fee at 75 per cent loan to value.
Two-year fixed rate mortgages
Yorkshire BS has a two-year fixed rate at 3.66 per cent with a £995 fee at 75 per cent loan to value.
Nationwide BS has a two-year fixed rate at 3.69 per cent with a £999 fee at 75 per cent loan-to-value.
Low-deposit mortgages
Five-year fixed rate mortgages
HSBC has a five-year fixed rate at 4.19 per cent with £969 fee at 90 per cent loan to value.
Nationwide BS has a five-year fixed rate at 4.19 per cent with a £999 fee at 90 per cent loan to value.
Two-year fixed rate mortgages
Bank of Ireland has a two-year fixed rate at 3.99 per cent with a £1,495 fee at 90 per cent loan to value.
West Brom BS has a two-year fixed rate at 3.99 per cent with a £1,499 fee at 90 per cent loan to value.
Tracker and discount rate mortgages
The big advantage to a tracker mortgage is flexibility. The downside is they are currently more expensive, so it will take a few more interest rate cuts before borrowers start beating the fixed rate deals.
The can sometimes be the case with discount rate mortgages, which track a certain level below the lenders’ standard variable rate.
A fixed-rate mortgage will almost inevitably carry early repayment charges, meaning you will be limited as to how much you can overpay, or face potentially thousands of pounds in fees if you opt to leave before the initial deal period is up.
You should be able to take a fixed mortgage with you if you move, as most are portable, but there is no guarantee your new property will be eligible or you may even have a gap between ownership.
Many tracker deals have no early repayment charges, which means you can up sticks whenever you want – and that suits some people.
Make sure you stress test yourself against a sharper rise in base rate than is forecast.
Compare true mortgage costs
Work out mortgage costs and check what the real best deal taking into account rates and fees. You can either use one part to work out a single mortgage costs, or both to compare loans