Fixed mortgage rates fell at their fastest pace since October 2024 last month, offering a reprieve for borrowers who have endured months of rising costs linked to the conflict in the Middle East.
Data from the Moneyfacts UK Mortgage Trends Treasury Report shows the average two-year fixed rate dropped by 0.16 percentage points in June, while the five-year equivalent fell by 0.11 points. Both now sit at 5.52%, their lowest level since the start of March.
The figures mark a significant shift. Since the Iran conflict erupted in late February, swap rates surged and lenders pulled hundreds of products from the market. At the peak of the disruption, mortgage availability shrank sharply and fixed-rate pricing climbed well above the levels seen at the start of the year.
One of the more unusual features of recent months has been rate inversion, where two-year fixed deals cost more than five-year ones. That pattern persisted from April through June as lenders priced in short-term uncertainty while betting that conditions would stabilise over a longer horizon.
The gap is now narrowing. With both averages converging at 5.52%, the market appears to be edging back toward a more conventional pricing structure, where shorter-term fixes carry lower rates than longer commitments.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers will breathe a sigh of relief to see fixed mortgages falling at their fastest pace for almost two years, combined with a calmer period of product churn and an uplift in choice.”
Mortgage availability increased for a third consecutive month in June, with the total number of deals rising by 45 to 7,177. The five-year fixed rate at 95% loan-to-value dipped below 6% for the first time since March, a particularly relevant threshold for first-time buyers stretching to purchase with small deposits.
The recovery, though, isn’t complete. There are still 307 fewer mortgage products on the market compared with the start of March, before the Middle East escalation caused widespread repricing and withdrawals.
The overall Moneyfacts Average New Mortgage Rate fell by 0.12 percentage points to 5.47%, its biggest monthly decline since March 2025.
The June rate reductions were driven largely by falling swap rates, the wholesale borrowing costs that underpin fixed-rate mortgage pricing. When geopolitical tensions eased in late May and early June, gilt yields retreated from their highs and swap rates followed. Lenders responded by cutting headline rates, competing for a smaller pool of active borrowers.
Springall noted that the last cuts of comparable scale came in October 2024, when two-year and five-year rates dropped by 0.16 and 0.13 percentage points respectively. “Lenders responded positively to falling swap rates in June,” she said.
The optimism comes with a significant caveat. The collapse of the Iran ceasefire in early July sent the 10-year gilt yield surging 13 basis points to 4.957%, its highest level in nearly a month. That kind of volatility feeds directly through to swap rates and, from there, to the fixed-rate deals available to borrowers.
Gerard Boon, managing director of Boon Brokers, described the mood among clients as bleak. “The general mood is one of uncertainty and pessimism from clients and brokers in the industry,” he told Mortgage Introducer. “An incoming change of prime minister and ongoing uncertainty surrounding the war in Iran, and its impact on future energy prices, has left a feeling of dread amongst clients and brokers for the future.”
Springall echoed the concern: “This positive trajectory could be thrown off course, as renewed escalation in geopolitical tensions could slow the tempo of mortgage rate cuts.”
The Bank of England held its base rate at 3.75% at its June meeting, with two of the nine Monetary Policy Committee members voting for an immediate rise to 4%. Services inflation stood at 3.7% and CPI at 2.8% in May, keeping the committee cautious.
The next MPC decision falls on 30 July. Some brokers believe renewed geopolitical pressure could tip the balance toward a rate rise, which would send a fresh chill through a mortgage market already operating under strain.
One broker, speaking to Mortgage Introducer, was blunt: “I don’t think I’ve ever seen a banking system so cautious in my life. They don’t know what’s coming. It just affects everything: pricing, markets, gilts.”
For buyers and remortgagers across Norfolk and Suffolk, the June rate drop offers a window that may not stay open long. A five-year fix at 5.52% on a typical Norwich property is meaningfully cheaper than the rates available just three months ago.
The return of sub-6% deals at 95% LTV is particularly significant for first-time buyers in towns like Attleborough and Thetford, where lower entry prices make high-LTV borrowing a common route onto the ladder.
Whether these rates hold depends almost entirely on what happens next in the Middle East and whether the Bank of England decides the inflationary pressure warrants pushing borrowing costs higher. Buyers who have been waiting for conditions to improve may find that June’s data gives them a reason to act, but the clock is ticking.
