Respite for debtors as mortgage charges fall – however specialists warn it is too quickly to say if it is the turning level

Borrowers have been handed some respite after a fall in the cost of fixed-rate mortgages following weeks of increases.

The cost of home loans has shot up since the outbreak of war in the Middle East dashed hopes of interest rate cuts and sparked fears of resurgent inflation.

But the average two-year fixed-rate mortgage fell yesterday, albeit marginally, to 5.89 per cent from 5.9 per cent while the typical five-year rate dipped from 5.78 per cent to 5.77 per cent, according to Moneyfacts. It was the first time average rates for both have fallen in tandem since early last month.

Experts said it was too soon to say whether this is the turning point, and noted the rates are still far higher than before the war when the average two-year and five-year fixes were 4.83 per cent and 4.95 per cent respectively.

Rachel Springall, finance expert at Moneyfacts, said: ‘It is more likely that lenders will see the latest ceasefire as a period of grace to slow down the pace of interest rate changes over the next couple of weeks, rather than them moving in their droves to significant rate cuts. 

‘In the longer term, the tide could turn and interest rates may come down again if the Strait of Hormuz remains open and the price for oil reduces.’

Inflation threat: The cost of home loans has shot up since the outbreak of war in the Middle East dashed hopes of interest rate cuts and instead sparked fears of a series of hikes