Rachel Springall, at Moneyfacts, said borrowers “could breathe a sigh of relief” at the drop in rates, but warned that signs of conflict re-emerging meant it could be “some time yet” before most deals fell back below 5pc.
She said: “We would really need to get a bit more stability. This positive trajectory could be thrown off course, as renewed escalation in geopolitical tensions could slow the tempo of mortgage rate cuts.”
Swap rates – used by lenders to plan the cost of borrowing – spiked after the US launched strikes on Iran on Feb 28, but subsequently fell back in mid-June following the announcement of a 60-day ceasefire.
However, oil prices climbed again on Monday after the US launched a fresh wave of attacks against Iran, reversing some of the recent decline in swap rates and leading markets to forecast a 100pc chance of an interest rate rise by November.
The Bank of England’s Monetary Policy Committee voted on June 18 to hold interest rates at 3.75pc for the fourth consecutive time after inflation was unchanged in May at 2.8pc. Its next vote is on July 30.
Ashley Webb, a data analyst at Capital Economics, said that while investors expected the Bank Rate to climb to 4pc, lenders had been slow to react to an earlier decline in swap rates, which could help ease the effect of another spike.
He added that if the Bank of England “held its nerve” rather than raised rates, “mortgage rates will ease to around 4.2pc by the end of this year”.
