Editor's note: This brief was summarised by The Property AI Newsroom from a report by PropertyWire. Read the original article for full details.

UK Fixed Mortgage Rates Drop to Lowest Level Since March 2026

UK fixed mortgage rates have declined for a consecutive month, reaching their lowest levels since March 2026. The average two-year and five-year fixed rates both fell to 5.52% in early July, according to Moneyfacts data.

The reductions represent monthly drops of 0.16 percentage points for two-year fixes and 0.11 percentage points for five-year fixes. These are the largest monthly reductions since October 2024. The rate cuts follow a period of increased borrowing costs caused by geopolitical tensions, which had previously dampened housing market demand.

Product Availability and LTV Changes

Mortgage product availability increased for the third month in a row, with 45 more deals bringing the total to 7,177 options. However, this remains 307 fewer products than were available at the start of March 2026.

For borrowers with larger deposits, the average two-year fixed rate at 60% loan-to-value (LTV) dropped from 5.17% in June to 4.97%, falling below the 5% threshold. The average five-year fixed rate at 60% LTV also decreased, from 5.29% to 5.23%.

First-time buyers with smaller deposits saw improvements as well. The average five-year fixed rate at 95% LTV fell below 6% for the first time since March 2026, reaching 5.92%. The two-year fixed rate at 95% LTV dropped from 6.23% to 6.13%.

Market Volatility and Outlook

The average shelf-life of mortgage products was 14 days in June, one day less than in May, indicating ongoing market volatility. The recent rate falls have been linked to lenders responding to falling swap rates in June. The previous rate inversion, where two-year fixed rates exceeded five-year rates for three months, has started to unwind.

Market uncertainty remains, with upcoming inflation figures and the Bank of England’s base rate decision at the end of July highlighted as critical factors. There is also uncertainty due to the appointment of a new Prime Minister and potential changes to housing policy. While regional market dynamics vary, the recent reductions in mortgage rates could support transaction levels in the coming months.

The outlook remains cautious, as renewed geopolitical tensions or economic changes could affect the pace of further rate cuts. Despite recent improvements, market conditions are still subject to rapid change.