(Bloomberg) -- The cost of a two-year fixed-rate mortgage has fallen below 6% for the first time in almost nine weeks, as the UK’s home loans crunch eases off.
The average two-year fixed-rate mortgage fell to 5.99% Monday, according to Moneyfacts Group Plc. That’s the first time it has dropped below the threshold since Oct. 4 when key home loan rates were spiraling in the aftermath of then-Prime Minister Liz Truss’s mini-budget. The average five-year fixed-rate deal also fell to 5.78%, after dropping below 6% almost a fortnight ago.
It’s the latest sign of stabilization in the UK mortgage market, with banks relaxing some repayment terms and distressed asset investors hunting for opportunities.
Still, declining rates are only slightly relieving the cost burden for unlucky homeowners or first-time buyers. With rates at 6%, a two-year mortgage will cost about £10,000 ($12,260) more during the fixed period than the same product issued last December, when rates were about 2.34%, according to Moneyfacts. That’s based on a mortgage of £200,000 borrowed for 25 years.
The Office for Budget Responsibility said last month that mortgage rates will stay close to 5% for the next five years as the era of cheap money comes to an end. Homeowners’ average loan rates will rise steadily before peaking in the second half of 2024, according to its latest forecasts.
That’s discouraging many renters from seeking to own a home of their own. A survey conducted for insurance company Aviva Plc indicates that as many as a million potential buyers under 45 have ruled themselves out of the first-time buyer market.
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