A decline in swap rates following the Bank of England’s recent base rate cut may result in lower mortgage costs for homebuyers and buy-to-let property investors, says Octane Capital.

The lender has analysed movements in five-year swap rates, which have been decreasing since the beginning of the year. Swap rates influence the cost lenders pay to secure fixed-rate funding and, in turn, affect mortgage pricing.

Since the Bank of England reduced its base rate to 4.5%, five-year swap rates have averaged 4.16%, down from 4.23% between the Autumn Budget and the end of 2024. Earlier this year, they briefly increased to 4.31% before declining again.

Jonathan Samuels, CEO of Octane Capital, said: “It is, of course, still very early days, but current market indicators suggest that there is light on the horizon for the nation’s home movers and buy-to-let investors and the year ahead is set to be one of far greater positivity when compared to 2024.”

Samuels added: “Not only have we seen swap rates trending downwards so far this year, but this is a trend that will have been strengthened by the Bank of England’s decision to cut the base rate to 4.5% last week and some industry sources are already showing five-year swap rates having fallen below the 4% threshold, which is big news.”

Lenders have started reducing mortgage rates in anticipation of the base rate cut, in contrast to the reaction to previous rate reductions last year.

“We’ve also seen lenders act with greater confidence, choosing to reduce mortgage rates in anticipation of the recent interest rate cut and this simply wasn’t the case during the closing stages of last year despite us seeing two base rate reductions,” he said.

The average buy-to-let mortgage rate, which was 4.53% in 2024, has since fallen to 4.38%. Owner-occupier mortgage rates have also decreased from 4.81% last year to 4.65% in 2025.

Samuels said that mortgage affordability is improving and expects this trend to continue, providing a “much-needed boost to property market sentiment.”