Interest rate

Average mortgage rates fall below 6% for the first time since July (Image: Getty)

The average five-year fixed mortgage rate offered by lenders has dropped below six percent for the first time since early July.

Rates fell from 6.03 percent on Wednesday down to 5.99 percent across all deposit sizes, moneyfactcompare.co.uk research shows.

The last time that the average five-year fixed deal was below six percent was on July 3, when it stood at 5.97 percent.

Matt Smith, a mortgage expert at property website Rightmove, said: “Following the positive news on inflation and the Bank’s decision to hold the Base Rate, we have seen swap rates, the underlying costs of fixed-rate mortgages, stabilise.

“The important takeaway from last week for those looking to take out a mortgage soon is that the expectation that the Base Rate has now peaked is now the predominant view of the market, although there is still a sizeable but decreasing risk that we may see one more increase this winter.”

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The Bank of England left the Base Rate unchanged at 5.25 percent in September 2023 (Image: EXPRESS)

Mr Smith added: “As we approach the final quarter of this year, we are likely to see continued stability in the mortgage market persist with rates continuing to gradually drop and more lenders likely to offer sub-five percent deals.”

Major mortgage lenders have been reducing rates this week following the Bank of England’s decision to leave the Base Rate unchanged at 5.25 percent last Thursday. Borrowers with larger deposits now have access to five-year fixed-rate mortgages below five percent.

For shorter mortgage terms, the average two-year fixed residential mortgage rate dropped to 6.5 percent on Wednesday, down from 6.53 percent.

HSBC UK has lowered several mortgage rates by up to 0.16 percentage points. Among the deals is a five-year fixed-rate mortgage at 4.93 percent with a £999 fee for borrowers with a 40 percent deposit, marking a 0.96 percentage point reduction since July.

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On Tuesday, Santander UK also cut selected mortgage rates by up to 0.5 percent, offering a five-year fixed rate at 4.95 percent with a £999 product fee for those with a 40 percent deposit, down from the previous 5.1 percent.

Best mortgage deals today

Uswitch updates a table of leading mortgage deals every 12 hours. At the time of writing, the top two-year fixes include:

• Skipton Building Society – 5.7 percent – 90 percent Loan to Value (LTV)
• NatWest – 5.62 percent – 80 percent LTV
• Bank of Ireland – 5.39 percent – 70 percent LTV
• NatWest – 5.34 percent – 60 percent LTV

For five-year fixes:

• Skipton Building Society – 5.28 percent – 90 percent LTV
• NatWest – 5.02 percent – 80 percent LTV
• Virgin Money – 4.82 percent – 70 percent LTV
• Virgin Money – 4.82 percent – 60 percent LTV.

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Sainsbury’s increases interest on fixed ISA to 5.7% and earns ‘excellent’ rating (Image: Getty)

Sainsbury’s has increased the interest rate on its one-year fixed ISA to 5.7 percent, earning an “excellent” Moneyfacts rating.

While personal savings allowances remain frozen and interest rates increase, ISAs are becoming increasingly popular amongst Britons as an effective tax wrapper.

Commenting on the deal, Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk , said: “Sainsbury’s Bank has increased the rates on its Fixed Rate Cash ISAs this week, including its one-year deal which takes a prominent position in the market.

“The deal now pays a rate of 5.7 percent on anniversary and may appeal to savers who want to invest over the next year and use their ISA allowance.”

Ms Eastell added: “This deal pays an attractive rate when compared to similar products. Overall, this deal earns an Excellent Moneyfacts product rating.”

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The ISA allowance for the 2023/24 tax year is £20,000 (Image: EXPRESS)

Savers can open the one-year bond online with a minimum deposit of £5,000. Interest is calculated daily and paid on the anniversary of account opening.

UK residents aged 18 or over can apply and the opening deposit must be invested within 30 days. However, the product is designed to hold people’s money for the full term and only release the funds on the maturity date.

Those who need access before maturity will need to withdraw the whole balance and close the account. A charge equivalent to 270 days’ interest will then be applied.

But while Sainsbury’s may be offering a much more attractive deal, it isn’t quite taking the top spot yet. The highest rate available at present is 5.85 percent and that’s offered by Virgin Money.

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Savers can open Virgin Money’s One Year Fixed Rate Cash ISA Exclusive (Issue 6) online or in-store, and they must be UK residents aged 16 or over.

People must also have a current account with Virgin Money, which was opened on or after December 4, 2019. Savers also qualify if they originally opened their current account with Clydesdale Bank, Yorkshire Bank, or B such as a Signature Current Account.

There is no minimum deposit required and interest is calculated daily and applied at maturity, which falls on September 30, 2024. Withdrawals are permitted but money cannot be put back in. However, any withdrawals made within the fixed rate period are subject to a charge equivalent to 60 days’ loss of interest on the amount withdrawn.

Shawbrook Bank’s One Year Fixed Rate Cash ISA Bond (Issue 81) places just behind with an AER of 5.83 percent.

The account can be opened with a minimum deposit of £1,000 and interest is paid on the anniversary. Savers must be aged 18 and over and earlier access will be subject to a 90-day loss of interest.

Fixed-rate ISA balances rose from £76.5billion to £138.8billion over the 12 months, an 81.5 percent increase, research from Paragon shows.

Derek Sprawling, director of savings at Paragon Bank, said: “The shift in the savings market over the past 12 months has been unprecedented, we have never experienced the amount of switching to fixed-rate variants and new account openings before, particularly in the ISA segment of the market.

“To record a 98 percent increase in fixed-rate balances overall, and a more than doubling of the amount held in non-ISA fixed-rate variants will have changed savings habits for years to come.”

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