Mortgage interest rates fall to four per cent - is now the right time to fix your rates?

Barclays and Santander are offering both two-year and five-year mortgage rates fixed at 3.99 per cent, according to MoneySavingExpert.com.

The news comes after the Bank of England lowered the base rate of interest from 4.5 per cent earlier this month, down from 4.75 per cent. The average mortgage interest rate had been sitting at around 4.2 per cent prior to the announcement.

At the same time, many mortgage lenders have reduced the window in which homeowners can lock in a new mortgage, with most cutting this timeframe from six months to just four or three. In fact, Virgin Money is the only major lender that still has the old six-month window.

Speaking to Martin Lewis’ team, Nicholas Mendes from John Charcoal said: “Fixed-rate mortgages are becoming slightly cheaper due to a notable decline in swap rates, particularly for terms between two and five years. Currently, swap rates for these terms have fallen below four per cent, a significant drop compared to January.

“By the end of the year, the most competitive two-year fixed rates are projected to be around 3.5 per cent, with five-year fixes slightly higher at approximately 3.6 per cent. While some may speculate on rates falling to three per cent or lower, this appears unlikely, as it would require the base rate to drop significantly to around 2.5 per cent.”

Should you fix your mortgage now?

Speculation from mortgage experts is that interest rates will continue to fall as the year progresses. This means that if you’re able to hold off on renewing your mortgage until later in the year, it wouldn’t be a bad idea to do so.

Some people might be considering what’s known as a “tracker” mortgage, which runs alongside the base interest rate. But the volatility of this option - and the risk that interest rates could still increase at a later date - has prompted experts to warn against this option.

Ben Thompson from the Mortgage Advice Bureau said: “Trackers tend not to be overly attractive these days. Logically a tracker may make sense now if you believe rates will fall a lot – but we don't have that level of certainty.”