Average mortgage rates for both fixed and tracker mortgages have remained unchanged despite SWAP rates falling, Moneyfacts.co.uk has found.
The average 2-year fixed and tracker mortgage rates have remained unchanged since the beginning of June at 2.49% and 2.01% respectively, while the average 5-year fixed rate has remained unchanged at 2.85% since the beginning of May this year.
Darren Cook, finance expert at Moneyfacts.co.uk, said: “It is clear that the Bank of England warning in May – that it is watching mortgage rates ‘like a hawk’ – is continuing to influence lenders, with the average 2 and 5-year fixed mortgage rates, and the average two-year tracker rate remaining unchanged this month.
“However, the sharp SWAP rate declines seen in June have continued this month, with the 2-year, 5-year and 10-year SWAP rates decreasing by 0.11%, 0.12% and 0.13% respectively.”
The 2-year SWAP rate has fallen by 0.31% to 0.74% since May this year, while the 5-year SWAP rate has dropped by 0.39% to 0.80% and the 10-year by 0.40% to 0.95% over the same period.
Cook added: “This could be a result of markets now reacting to the anticipation that the Bank of England is expected to cut base rate before the end of 2019, following 12 months of economic uncertainty.
“Under previous normal market conditions, when SWAP rates took a sharp deviation, we could comfortably predict that fixed mortgage rates would follow suit after a three to four-week lag.”
However, Cook said that with the hawkeyed regulator watching closely, it is unclear as to whether mortgage rates will respond to this most recent decline in SWAP rates.
He said: “In fact, it may be the case that we need to get much closer to an almost certain base rate change before we see large-scale changes to average mortgage rates.
“It is not all bad news for borrowers however, with the difference between the average 2-year and 5-year fixed rates currently at 0.36% and the difference between the average 5-year and 10-year fixed rate currently only 0.16%, borrowers are paying less than before to benefit from the security of locking into a fixed rate for a longer-term amid current economic uncertainty.”
The average 10-year fixed rate – a sector with only 151 individual products – did see some movement, albeit only increasing by 0.01% to 3.01% last month.