The average two-year fixed rate mortgage stands at 6.79%, down from 6.81% recorded yesterday, according to data site Moneyfacts. However, this is still up from 6.7% noted last week.

Meanwhile, the average five-year fixed rate now comes in at 6.31%, down from 6.33% yesterday.  Again, this is higher than the 6.2% recorded last week.

However, Moneyfacts added that the last day-on-day drop for both two- and five-year fixed deals was back in May 2023.

Elsewhere, the average standard variable rate stands at 7.67% as of 1 July.

On the number of products, there were 4,495 residential mortgage deals on the market, which is an increase from 4,316 yesterday. It is also an increase from 4,346 last week.

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‘Sense of optimism in the mortgage market’

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The better-than-expected inflation data for June has brought about a palpable sense of optimism in the mortgage marketplace following a brutal couple of months during which the spike in mortgage rates – to levels not seen since the financial crash – laid waste to housing affordability.

“The decrease is modest, amounting to savings of around £3 a month based on a 75% loan-to-value fixed rate mortgage with a 30-year loan term on a £300,000 home. But it is a sign that mortgage rates are heading in the right direction.

“The expectation of lower-than-feared interest rate hikes to tackle inflation is enough to drag down the cost of fixed-rate deals. This is because the metrics used to price fixed-rate deals gives lenders the green light to lower the cost of fixed-rate mortgages in anticipation of a future where borrowing costs will be reduced. The burning question is, how low will mortgage rates go and how fast will they fall?”

Jobson added there’s no such reprieve for the 2.2 million homeowners on variable rate mortgages, which are tied to the Bank of England’s base rate.

“They will continue to feel the full brunt of the expected increase in interest rates as part of the UK’s central bank’s efforts to drag inflation closer to its 2% target. They are likely to face higher costs for some time to come.”