Fixed mortgage rates across the UK have continued their downward trend for a second consecutive month, with data from Moneyfacts indicating the most significant monthly reductions witnessed since October 2024. As of early July 2026, both the average two-year and five-year fixed rates have fallen to 5.52%. This represents a drop of 0.16 and 0.11 percentage points respectively, bringing rates to their lowest level since the beginning of March 2026.
This welcome reduction follows a period where geopolitical tensions contributed to increased borrowing costs, subsequently dampening demand within the housing market. The improved affordability conditions come as the property sector continues to navigate broader economic pressures. While the precise impact will vary across different regions of the UK, these mortgage rate reductions could provide a much-needed boost to transaction levels in the coming months.
Beyond the headline figures, the market has also seen an increase in product availability, rising for a third consecutive month. The total number of mortgage deals now stands at 7,177, an increase of 45 options. However, this still leaves 307 fewer products available compared to the start of March 2026. For those with larger deposits, the average two-year fixed rate at 60% loan-to-value (LTV) has dipped below the 5% threshold, falling from 5.17% in June to 4.97%. Similarly, the average five-year fixed rate at 60% LTV decreased from 5.29% to 5.23%.
First-time buyers, often facing the biggest hurdles, have also seen some positive movement. The average five-year fixed rate at 95% LTV has fallen below 6% for the first time since March 2026, now standing at 5.92%. The two-year fixed rate at 95% LTV also saw a reduction, dropping from 6.23% to 6.13%. Rachel Springall, a finance expert at Moneyfacts, attributed these lender responses to falling swap rates observed in June and noted that the recent rate inversion, where two-year fixed rates were higher than five-year rates, has begun to unwind.
Despite these improvements, the market outlook remains cautious. Nathan Emerson, chief executive at Propertymark, suggested these rate falls might offer greater flexibility for buyers and sellers, potentially indicating that the worst of recent rate increases has passed. However, he cautioned that upcoming inflation figures and the Bank of England’s base rate decision, expected at the end of July 2026, will be crucial. Emerson also highlighted ongoing speculation regarding potential future rate rises and the uncertainty surrounding the appointment of a new Prime Minister and prospective shifts in housing policy, all of which could impact lender sentiment and market stability.