Mortgage rates to drop below 4pc ‘within weeks’

Riz Malik, of mortgage brokerage R3, said lenders hadn’t yet reacted to the latest Bank Rate decision and inflation figures, but that sentiment had shifted.

“[The MPC’s] voting record shows that the propensity to raise rates has vanished, and better-than-expected inflation suggests cuts will come earlier.

“This will raise hope of this mythical Bank Rate cut that we’re all desperate for. The data was as good as it was going to get.

“There’s a possibility that some lenders will hit 4pc on five-year fixed mortgage rates in the next couple of weeks. This will depend on swap rates and how strong demand is. But the number offering 4pc will increase going forward.”

More than 1.5 million homeowners are due to reach the end of fixed-rate mortgage deals throughout 2024, with many being forced to refinance at rates that are double what they are used to.

The average two-year fixed-rate deal is now 5.81pc and the average five-year deal is 5.39pc, according to the data firm Moneyfacts, down from nearly 7pc in July 2023.

However, this is still a big jump for those who had taken out a two-year deal in early 2022, when average rates were well below 3pc.

Oliver Laver, of Mortgage Key, was more cautious about the prospect of mortgage rates coming down quickly.

He said: “I think we’re going to see sub-4pc on a five-year fixed mortgage in two or three months. But the question is whether they sit there.

“We might then see [mortgage rates] going back up again, as inflation proves difficult to get down further. I see a hot jobs market in the US, and that worries me.

“We might be looking at Q4 before it settles. And we’ve got an election, which adds uncertainty.”