The interest rate on the average five-year fixed mortgage has dropped below 6% for the first time in nearly three months.
According to financial information firm, Moneyfacts, the last time the average five-year rate was below 6% was 3 July.
As of Thursday, the firm says, the charge for the average five-year fixed mortgage is 5.99%. It means mortgage holders can get cheaper and also more expensive mortgage rates but the average has dropped.
Mortgage bills had been going up as the Bank of England has brought up base interest rates in an effort to reduce inflation, which currently stands at 6.7% – more than three times the Bank’s target of 2%.
In response to increased base rates, decided by the Bank’s Monetary Policy Committee, lenders have been increasing the rates they offer on their mortgages.
But the mortgage rate increases have begun to slowly reverse.
A surprise drop in key measures of inflation has brought to a halt the Bank’s programme of 14 rate rises – the rate was held at 5.25%.
While the 6.7% rate of inflation, in the year up to August, is high, it’s lower than economists had expected and led to the base rate remaining the same.
Even before the latest official inflation data average mortgage rates had been coming down as a result of sharply falling inflation figures.
The inflation data led markets to expect fewer interest rate rises, which brought down how much financial institutions were charging for their mortgage products.
Rates for other mortgage products have also come down. The average two-year fixed mortgage rate is 6.5%, down from 6.53% on Wednesday. It ticked above 6% in June.
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