Average two-year fixed rate edges down to 5.96%: Moneyfacts

The average two-year fixed rate edged down by a single basis point to 5.96% this week, according to Moneyfacts' weekly rate watch (Mortgage Strategy, 16 October). The average five-year fix was unmoved at 5.99%, and the average three-year fix held steady at 5.74%. A basis point (bp) is one hundredth of a percentage point. If you finance a short-let or a rental, this is a pause, not yet a turn.

Are mortgage rates starting to come down?

Not yet, on Moneyfacts' reading. Head of consumer finance Adam French said several major lenders cut selected rates after weeks of successive increases, including HSBC, NatWest, Royal Bank of Scotland and First Direct. But repricing stayed mixed. Atom Bank, Bluestone Mortgages, Virgin Money and Yorkshire Building Society increased selected rates, and some lenders withdrew products.

French called the cuts a sign of some easing in pricing pressure. He also said it is "far too early to declare that a sustained downward trend is beginning" (Mortgage Strategy, 16 October).

The detail matters when you compare quotes. Moneyfacts lists First Direct fixed rates reduced by up to 15bps, and selected NatWest and Royal Bank of Scotland fixes reduced by up to 17bps. Bluestone Mortgages and The Mortgage Lender increased selected fixed rates by up to 30bps, and Yorkshire Building Society's fixed rates rose by 12bps. "Up to" is the largest move a lender made, not the change on every product. Our negotiation and finance hub covers how investors work with brokers when lenders reprice.

What does a 5.96% average fix mean for your monthly costs?

The report quotes no buy-to-let or holiday-let rates, so your own quote may differ.

To show the scale, take an illustrative £200,000 loan on interest-only terms (you pay only the interest each month and repay the loan at the end). On our arithmetic, the 5.96% two-year average means £993.33 a month in interest. The 5.99% five-year average means £998.33, just £5 more. The 5.74% three-year average means £956.67.

The three-year figure stands out. On our arithmetic, it sits 0.25 percentage points below the five-year average, worth £41.67 a month on the same loan, before fees. You can test whether your income covers a given rate with our free stress test calculator.

Now bring it back to your listing. Divide your monthly finance cost by your average nightly rate. That gives the number of booked nights each month that go to the lender, before cleaning, platform fees or bills. Our free property calculators help you run the other side of the sum.

Who can still get a sub-5% fixed rate?

French counted around 25 sub-5% fixed rate deals available now, excluding those restricted to specific locations. All of them are at max 60% LTV (loan to value, the loan as a share of the property's value). Many of the products are aimed at second-time buyers.

French said it is encouraging to see some lenders still competing at high LTV. Newcastle Building Society cut selected fixed rates up to 95% LTV and introduced new products at 90% and 95% LTV. Leek Building Society reduced selected fixed rates by up to 64bps and launched a new 95% LTV fix. West Brom Building Society also introduced products aimed at borrowers with smaller deposits.

If your current fix ends soon, you may wish to ask your broker which of this week's movers lend on your type of property. Our property investment strategies hub covers strategy comparisons, including serviced accommodation against buy-to-let.

Key takeaways

• Moneyfacts' average two-year fixed rate edged down one basis point to 5.96% this week, reported on 16 October.

• The average five-year fix was unmoved at 5.99%, and the average three-year fix held at 5.74%.

• The report quotes no buy-to-let or holiday-let rates, so your own quote may differ.

• On our arithmetic, interest on an illustrative £200,000 interest-only loan at 5.96% is £993.33 a month.

• Moneyfacts counts around 25 sub-5% fixed rate deals, all at max 60% LTV, excluding location-restricted products.