Mortgage rates are poised to drop following the decline in average swap rates, as revealed by the latest research conducted by Octane Capital.

Octane Capital scrutinized average swap rates over 30 and 60-day periods to forecast potential market trends ahead of the widely anticipated base rate reduction by the Bank of England on 1st August.

With the UK economy showing positive signs of recovery and inflation aligning with the target rate of 2%, a reduction in interest rates is widely expected in August, exactly a year after the Bank of England raised the base rate to its peak of 5.25% in August 2023.

The mortgage market is already reacting in anticipation, as swap rates exhibit early signs of a downturn.

In the past 30 days, swap rates decreased at an average daily rate of -0.22%; contrastingly, the previous 30 days saw swap rates rise at an average daily rate of 0.06%.

Looking at the last 60 days, swap rates dropped by an average of -0.08% daily, compared to an average daily increase of 0.13% in the preceding 60 days.

Jonathan Samuels, CEO of Octane Capital, remarked: “With inflation finally falling to within the Bank of England’s target rate of 2%, there’s a high chance that we could see a cut to interest rates come August, a year on from them hitting their recent peak of 5.25%.

“We’re already seeing swap rates start to reduce in anticipation of a potential base rate cut and we expect this trend to continue as the next Bank of England decision approaches.

“This will be welcome news for mortgage holders who have seen the cost of their repayments climb considerably in recent times, and so too for prospective buyers who have had to re-evaluate their position in the market due to increased borrowing costs.”