Mortgage rates drop below 4% for the first time in months – so do brokers think now is a good time to fix?

It comes as both Barclays and Santander have launched two- and five-year fixed rate mortgages at 3.99%. This follows the Bank of England cutting the base rate from 4.75% to 4.5% earlier this month. Until this point, the best two- and five-year fixed rates had hovered around 4.2% for the past three months.

In other mortgage news, lenders are also continuing to reduce how far in advance they let existing borrowers lock in a new mortgage before their current deal end – known as a product transfer. Many major lenders had given borrowers six months, but a spate have recently cut this period to three or four months, leaving Virgin Money as the only major provider left with a product transfer window of six months.

In light of these changes, we've asked brokers for general information on the mortgage market. If you need bespoke advice, speak with a mortgage broker.

1. Why are fixed-rate mortgages getting cheaper?

David Hollingworth, L&C Mortgages: "Better inflation data and the ensuing base rate cut have seemingly helped eased concerns that rates may be higher for longer. Competition between lenders is fierce, so any chance to steal a march seems to be helping to push rates down."

Nicholas Mendes, John Charcol: "Fixed-rate mortgages are becoming slightly cheaper due to a notable decline in swap rates [which mortgages are indirectly linked to], particularly for terms between two and five years. Currently, swap rates for these terms have fallen below 4%; a significant drop compared to January."

2. What will happen to fixed-rate deals in the short term?

Nicholas Mendes, John Charcol: "In the short term, fixed-rate mortgage deals are expected to continue their gradual decline, following the market's expectations for falling interest rates throughout the year. However, the extent of these reductions will depend on movements in swap rates and lender competition."

David Hollingworth, L&C Mortgages "It's possibly too early to say that rates will go into freefall. However, once a lender does make a move, others will not want to be left too far behind. We've seen others making improvements to rates even if it's not sub 4%. If we get more positive data that pushes swap rates down further then there could be more pricing cuts, but equally we've seen how quickly sentiment can turn."

Ben Thompson, Mortgage Advice Bureau: "We have seen a reduction in swap rates (rate expectations) due to markets now seeing lack of economic growth as a slightly bigger issue than stubborn inflation. We expect to see lenders offer headline rates just under 4% as a consequence."

3. What is the longer-term outlook for fixed-rate deals?

Aaron Strutt, Trinity Financial: "There is a chance that fixed rates could come down this year and hopefully there will be more sub-4% fixes soon, but there is also a chance rates could go up again. If everything goes well with our economy and global economic pressures ease, inflation is under control, plus the Bank of England base rate comes down a few more times, then there is a chance rates will be lower."

Nicholas Mendes, John Charcol: "By the end of the year, the most competitive two-year fixed rates are projected to be around 3.5%, with five-year fixes slightly higher at approximately 3.6%. While some may speculate on rates falling to 3% or lower, this appears unlikely, as it would require the base rate to drop significantly to around 2.5%."

4. Is now a good time to fix?

Nicholas Mendes, John Charcol: "Whether now is the right time to fix depends on individual circumstances, but with fixed rates gradually falling and market expectations of further reductions, it's important for borrowers to weigh their options carefully. Ultimately, fixing now offers certainty in an evolving rate environment, but those with time remaining on their deal may prefer to wait and see how rates develop."

Ben Thompson, Mortgage Advice Bureau: "Rates are settling at close to what will become the new normal, so fixing anywhere between 4% to 5% shouldn't feel bad. But there is enough inflation to keep most people sufficiently worried that rates may remain at this level, plus of course US-related uncertainty that could spook and impact markets in several different ways."

Aaron Strutt, Trinity Financial: "It is probably the best time we have had to remortgage for a while. Rates have been falling, and lenders are very keen to issue mortgages."

David Hollingworth, L&C Mortgages: "The market has been more stable than in recent years and rates are better than the spikes when inflation was running riot. Fixed rate deals are pricing in expected rate cuts so, although we'd hope to see some improvement in fixes as base rate cuts become a reality, it could still be an expensive decision to wait and risk dropping onto an expensive SVR (standard variable rate)."

5. Are mortgages that track the base rate worth it at the moment?

Aaron Strutt, Trinity Financial: "The actual margin lenders are charging over the base rate is pretty small, but the base rate is too high for most people to be tempted to take a tracker. The fixed rates often comfortably undercut even the best tracker deals. If you are considering opting for a tracker, taking one without early repayment charges or with a switch-to-fix option is well worth it."

Ben Thompson, Mortgage Advice Bureau: "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."

David Hollingworth, L&C Mortgages: "As base rate cuts continue that margin will narrow and more borrowers will begin to think about whether a variable deal could offer a more cost effective option. However many will still prefer to know where they stand and so the surety of a fix will be right for them, especially if they wouldn't be well equipped to cope if rates did start to rise."

6. How far in advance should I start looking for a new mortgage?

David Hollingworth of L&C Mortgages said: "I'd suggest that starting to shop around three to four months in advance will help you get a deal in place. If there's any turnaround in rates then you will have a deal in the bag, but if rates do keep improving then there's still the chance to hop onto a better product before completion.

"If you want to start further ahead then it's possible to start as much as six months ahead [if you're remortgaging to a new lender], although the existing lender options may not be available until three or four months before, as product transfer windows have been reduced."