"Lenders are perhaps starting to feel the pressure of an increased number of their customers sitting on their Standard Variable Rate"
According to the report, average two-year fixed rates fell from 2.55% in July 2016 to 2.31% in January 2017, before inching down further to 2.26% this month.
Moneyfacts analysis also found that average two-year tracker rates are now 1.82%, down from 2.01% a year ago and 1.98% in January 2017.
Charlotte Nelson, Finance Expert at Moneyfacts, said: “While the average two-year fixed rate had stalled in recent months, it has fallen by 0.04% from June, so it appears that the trend of falling rates is now back on track. The fall in both the fixed and variable sector comes at an interesting time. Given mounting inflation and the Bank of England hinting at a base rate rise, falling rates are the last thing many would have expected.
The base rate debate has dominated the headlines in the past few weeks, which has had a knock-on effect on the interest SWAP rate, causing the two-year SWAP rate to rise from 0.53% at the start of June to 0.68% in July.
Recently, the savings market has also seen a boost. This, alongside the rising SWAP rates, has historically resulted in mortgage rates rising, but these influences are currently having little effect on mortgage rates, which are still on a downward trajectory.
Lenders are perhaps starting to feel the pressure of an increased number of their customers sitting on their Standard Variable Rate, knowing that if the Bank of England decides to increase rates, a substantial chunk of their mortgage book could move to another provider almost overnight. This may be the catalyst that is keeping rates low, as providers aim to lock customers into a deal with them."
