(qlmbusinessnews.com . Fri 22nd Aug, 2025) London, UK —
Finance Update: Moneyfacts Reports Significant Dip in UK Five-Year Fixed Mortgage Rates
For the first time since May 2023, homeowners have been greeted with the news that the average five-year fixed mortgage rate has dipped below the 5% mark, signalling a potentially easing borrowing landscape in the UK.
Moneyfacts, a leading financial insights service, reported on Thursday that this pivotal rate fell to 4.99%, down from 5% just the day before. Although the decrease appears minor, it is viewed by many in the industry as an indicator of changing tides in market confidence.
The reduction, albeit slight, could usher in increased confidence among buyers and spark enhanced competitiveness between mortgage lenders, according to analysts.
This news follows the recent drop of the average two-year fixed mortgage rate, which last week dipped below 5% for the first time since the financial ramifications of ex-Prime Minister Liz Truss’s mini-budget in September 2022 were felt. This rate went down to 4.97% from 4.98% on Thursday, continuing its downward trajectory.
Adam French, Moneyfacts' Head of News, regarded the latest data as a continuation of positive tidings for borrowers, highlighting that the market is showing signs of “more aggressive” competition among lenders.
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Further illustrating the changing mortgage landscape, Moneyfacts provided a detailed trend analysis. It showed a notable fluctuation in interest rates for both two-year and five-year fixed mortgage deals since January 1, 2022. Noteworthy is the sharp increase following the mini-budget announcement, with rates peaking in late October 2022. However, a gradual decrease has been observed in recent months, landing at 4.97% for two-year fixed and 4.99% for five-year fixed rates as of August 21, 2025.
French commented on the five-year rate reduction, stating, “The slow and steady decrease in borrowing costs, coupled with a robust growth in average earnings, has slightly improved affordability for a swath of homeowners and prospective buyers.”
Yet, he cautioned optimism regarding further base rate cuts in 2025, citing a recent inflation reading of 3.8% as a likely deterrent. He suggested that minor rate reductions might be the extent of what borrowers can anticipate in the near future as the lending sector acclimates to an environment of prolonged higher rates.
Peter Stimson, Mortgage Director at MPowered, also weighed in, calling the five-year rate drop a boon for those in the housing market. However, he advised caution, noting that the advertised average rates don't always tell the full story and better deals are often available for those with significant deposits or home equity.
As choices proliferate, the number of residential mortgage products on offer has increased, with 7,031 options now available to consumers, marking a slight rise from the day before.
With approximately 900,000 fixed-rate mortgage deals set to expire in the latter half of 2025, according to UK Finance, this development comes at a critical time for many borrowers.
Despite the current downward rate trend, it's important to remember that rates are still considerably higher than pre-mini-budget levels, a reflection of the heightened cost of government borrowing which reverberated through the mortgage market. This led to borrowing costs reaching their apex since the 2008 financial crisis by July 2023.
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