The cost of an average fixed rate mortgage has finally taken a step down after months of consistent increases. According to the latest data provided by Moneyfacts, the average two-year fixed-rate mortgage has dropped to 6.79 per cent today, a slight decline from the 6.81 per cent recorded yesterday. Similarly, the average five-year fixed-rate mortgage now stands at 6.31 per cent, down from 6.33 per cent yesterday.

Notably, Moneyfacts also reported an overall rise in the number of residential mortgage products available in the market. Today, there are 4,495 products on offer, compared to 4,316 yesterday, suggesting increased competition among lenders.

This recent development comes in the wake of consecutive increases in mortgage costs, which were triggered by the Bank of England’s decision to raise the base rate as a measure to combat inflation. The anticipation of further rate hikes had been weighing on the minds of borrowers, with expectations indicating a possible 0.5 percentage point increase during the next decision-making meeting in August.

However, a new inflation figure released on Wednesday seemed to have altered these projections. Market analysts have now revised their predictions, forecasting a more modest rise of just 0.25 percentage points for the base rate. Consequently, this change in outlook has led to a significant drop in swap rates – the rates at which banks lend to each other – and has fueled hopes for even cheaper fixed-rate mortgages in the coming week.

Nick Mendes, the mortgage technical manager at brokers John Charcol, emphasized the potential impact of this rate drop, citing the likelihood of more favorable fixed-rate prices. Nevertheless, Mendes urged caution and patience, pointing out that it took two months after a previous mini-budget for fixed rates to reach reasonable levels.

He also underscored the importance of monitoring the Bank of England’s response in August, as it could influence the direction of mortgage rates. Experts wonder whether the Bank will opt for a more modest 0.25 percentage point increase or decide not to ease the pressure and go for the originally anticipated 0.5 increase.

Aaron Strutt of Trinity Financial echoed Mendes’ sentiments and cautioned that while there is hope for further rate decreases, it is not guaranteed that mortgage rates have peaked. As a word of advice for borrowers looking to buy or remortgage, Strutt suggested seizing attractive rates currently available and securing a deal promptly. He added that borrowers could consider swapping their mortgages if rates improve, as the possibility of further increases in the Bank of England’s base rate remains a concern for the near future.

While the recent dip in average fixed-rate mortgages offers some respite for borrowers, industry experts urge prudence and awareness of the fluid economic landscape. Borrowers are advised to weigh their options carefully and consider locking in rates that meet their requirements while remaining attentive to any potential changes in the base rate that could impact mortgage costs in the future.