The average rate payable on 2 year fixed rate mortgages has fallen below five per cent for the first time in four months, figures from Moneyfacts.co.uk have revealed.

July saw a number of rate increases, taking the average up to 5.21% by the end of the month. The subsequent fall in rates has not been so rapid, taking four months to fall below the five per cent threshold.

"Borrowers continue to favour shorter term deals, as in uncertain times they are not tied in for long periods if market conditions change dramatically," Michelle Slade, spokesperson for Moneyfacts.co.uk said.


"Borrowers are finally starting to see more positive news coming out of the mortgage market.

"Falling rates on popular two year fixed rate mortgages, occurring against a backdrop of lenders raising the maximum loan-to-value on their most competitive deals suggests that competition is increasing.

"Lenders have become accustomed to the post banking collapse world and appear to finally be relaxing their credit criteria while remaining within a regulated framework. Swap rates have been falling over the last few weeks, but mortgage rates on medium term deals are yet to follow suit."

However, consumers looking to tie in for longer periods of time have not been so lucky in recent months, with the average rate of three year fixed products increasing to 5.58%.

(CD/GK)