Over 937,000 homeowners who took out mortgages in 2023 could benefit from a decline in monthly payments as they come off their two-year fixed rates, new analysis by Compare the Market has shown.

The group highlighted that homeowners needing to remortgage at the end of two-year deals could find that their mortgage rates have fallen since 2023, when two-year fixes had an average interest rate of 5.06%.

Compare the Market’s analysis was based on a Freedom of Information request to the Financial Conduct Authority (FCA) and data from the Bank of England (BoE).

It found that, based on BoE figures, the average two-year fixed rate is now 4.6% while the average five-year fixed rate is 4.33%. This analysis also came before the BoE opted to cut its base rate yesterday, meaning average fixed mortgage rates could follow and fall even further.

Based on a 30-year mortgage term and an average mortgage debt of £179,000, Compare the Market stated that homeowners who move onto a new fixed rate deal could see their annual payments decline by £597 on a new two-year fix, or by £940 on a new five-year fix.

However, if these homeowners were to fall onto their lender’s standard variable rate (SVR), their annual payments could increase by an average £2,861.

Mortgage expert at Compare the Market, Guy Anker, commented: “Our research shows average mortgage rates are lower than they were in 2023, so anyone coming off a two-year fixed rate deal may find their monthly payment could fall if they shop around for a new deal.

“If your mortgage deal is set to end this year, it’s wise to consider your options now as you can sometimes lock into a new deal up to six months before it is due to start. While there will be exceptions, it is often cheaper to get a new deal than move onto your lender’s SVR, which most fixes and trackers revert to.”

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