Confidence is increasing across the mortgage market, with brokers around the UK reporting a more positive outlook, as the cost of borrowing continues to fall steadily.
The average rate on a five-year fixed mortgage has dropped below 5% for the first time since May 2023.
According to Moneyfacts, the average five-year fixed rate hit 4.99% yesterday, from 5% a day earlier, in what the financial website described as a “symbolic turning point”.
Meanwhile, the average two-year fixed rate mortgage, which fell dropped 5% last week for the first time since former Prime Minister Liz Truss’s mini-budget in September 2022, dropped further on Thursday.
It fell to 4.97% from 4.98% the previous day, as lenders continue to compete more aggressively, amid greater industry wide confidence.
The latest Mortgage Market Tracker report from the Intermediary Mortgage Lenders Association (IMLA) shows that mortgage intermediaries remained confident in their businesses and the intermediary sector during Q2 2025, despite a softening in market activity following the end of the Stamp Duty holiday in April. Bank of England figures recorded a steep fall in overall gross secured lending from £76bn in Q1 to £58bn in Q2.
Kate Davies, executive director of IMLA, commented: “As expected, Q2’s figures reflect the front loading of mortgage business in Q1 this year caused by the end of the Stamp Duty holiday in April. They also reflect a market adjusting to tighter than anticipated economic conditions, given the slow pace of Bank Base Rate cuts and continued pressure on household finances. However, intermediaries continue to demonstrate resilience and confidence in their ability to deliver.
“Activity in the buy-to-let sector remains reassuringly buoyant, particularly in light of the concerns many have expressed over the imminent legislative changes the Renters’ Rights Bill will impose on landlords.”
A separate survey, conducted by Nottingham Building Society among 500 mortgage brokers, found that more than four in five (83%) brokers feel more optimistic about the state of the mortgage market than they did six months ago.
However, this optimism is tempered by concern that mortgage products are no longer fit for purpose for the reality of modern borrowers’ lives.
Nearly three quarters (74%) of brokers say that current mortgage products have failed to keep pace with the changing financial circumstances of UK borrowers.
More than half (52%) go further, saying lenders have been too slow to respond to evolving customer needs, suggesting that while confidence may be returning, the sector is at risk of complacency.
Greg Went, head of mortgage product and proposition at Nottingham Building Society, said: “It is encouraging to see signs of confidence returning to the mortgage market. Coupled with the recent Bank of England Base Rate cut, and the potential for further cuts this year, this could offer further relief for some borrowers and stimulate more activity across the sector.
“But the message from brokers is clear: lenders must ensure they keep pace with changing lifestyles. People’s lives and finances have changed, from income patterns to household structures, and mortgage products need to remain suitable.”
