Average two-year fixed back below 7%

Michelle Slade, analyst at Moneyfacts.co.uk, comments: "Mortgage borrowers have not had much to be happy about in the last few months as rates have continually soared. Just ten days ago the average two year fixed peaked at a rate of 7.08%, its highest in over a decade.

"As swap rates increased lenders were quick to pass on their increased borrowing costs to customers. However, as swap rates have declined these same lenders have not been in quite the same hurry to bring their rates back down.

"In the last week a number of lenders including Halifax, Abbey, Cheltenham & Gloucester, Nationwide BS and Woolwich have all started to reduce their rates, which has resulted in the average two-year fixed falling back below 7%, today standing at 6.96%.

"Until recently Moneyfacts best buys had been dominated by rates over 6%. Some lenders have now started offering deals with rates just below this level, so it's worth shopping around.

"The number of product on offer has also started to slowly creep back up as lenders that previously cut their product ranges right back start to extend them again. At the end of June there were just 3,403 products on offer; today that has increased to 3,887.

"However, it is too early to say that we have finally turned the corner. We need to see a more prolonged period of rate reduction, something which is starting to look unlikely. Although the average two-year swap rate is well below its peak of 6.52% in mid June, in the last few days swap rates have started to edge up again. If this continues we could see lenders once again passing the increased cost back onto consumers."