UK's lowest mortgage rate deal falls below 5% after interest rate pause

mortgage  Residential townhouses in London's Notting Hill district, one of the UK's most expensive residential areas. London, England
The UK's lowest mortgage rate deal falls below 5% after interest rate pause. Photo: Getty

UK mortgages are set to drop to the lowest rates for the first time since June, according to Rightmove.

Loan-to-value (LTV) mortgage rates fell below 5% on 60% and 75% five-year fixed deals.

The average monthly mortgage repayment for a typical first-time buyer on a five-year fixed 85% LTV deal is now at £1,194 over 25 years, up from £1,048 a year ago, according to Rightmove.

The average two-year fixed rate is now 6.11%, an increase of 4.57% from last year.

This comes after the Bank of England (BoE) announced on Thursday to pause interest rates, in response to falling inflation.

The BoE's Monetary Policy Committee (MPC) voted to keep interest rates at 5.25%, pushing lenders towards a mortgage reduction war, with The Mortgage works announcing a five-year fixed rate deal at 4.99%.

Read More: Bank of England halts latest interest rate rises

Interest rates guide what banks charge customers to borrow money and rises have wrought havoc in the housing market this year as customers grapple with increased mortgage payments.

Several lenders including Nationwide (NBS.L), Natwest (NWG.L) and Halifax have already slashed mortgage rates. More are expected to announce cuts in the coming weeks.

NatWest announced cuts of up to 0.31% on both fixed residential and buy-to-let deals, while Halifax slashed up to 0.50% off across a range of deals.

Rightmove said the lowest rate available for 60% and 75% LTV for a five-year fixed mortgage is now 4.94%.

“Seeing the return of rates under 5% in line with falling SWAP rates should hopefully give a boost of confidence to borrowers who have been living in fear of the end of their current fixed rate deals,” said Diarmuid Phoenix at Mint Mortgages & Protection.

Ranald Mitchell, director of independent mortgage broker Charwin Private Clients, said: “Seeing rates starting with a four is a sight for sore eyes and could provide a stimulus to the market and borrower confidence.”

Read more: Looming Christmas mortgage crisis for half a million UK households, warns Which?

However, some brokers warned, “we are not out of the woods yet” as the interest rate freeze is not guaranteed to last.

The pause by the BoE follows better than expected inflation data released last week, which showed price increases slowed to 6.7% in the year to August, down from July’s 6.8%, despite a rise in fuel prices.

Economists had expected Consumer Price Index (CPI) inflation to rise to 7% but the price rises declined to their lowest level since February 2022.

BoE governor Andrew Bailey had previously signalled the central bank was close to the top of its rate hiking cycle, spurring confidence in the market that the days of high rates were on their way out. Bets are still on that the bank rate could rise as high as 5.5%, which would be the highest level since the global financial crisis.

Latest mortgage rate date from Rightmove

Screenshot Rightmove mortgage data
Screenshot Rightmove mortgage data
Rightmove mortgage data
Rightmove mortgage data. Chart: Rightmove

Watch: Interest rate frozen — but it'll still be painful if you have a mortgage

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