(Bloomberg) -- A key measure of borrowing costs for residential property dropped below 6% for the first time since June, providing a glimmer of hope that the worst of Britain’s home loans crunch may be over.

The average two-year fixed-rate mortgage dropped to 5.99% on Friday, helped by a double pause in interest rates by the Bank of England. The average five-year fixed-rate deal dipped to 5.6%, also the lowest since June, according to data compiled by Moneyfacts Group Plc.

“Rates have been gently falling since early August due to a combination of factors including falling inflation, base rate pauses, and reductions in swap rates,” said James Hyde, a spokesperson for Moneyfacts. 

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UK households have been under pressure this year from mortgage rates that reached 14-year highs and stubbornly high inflation. A report released earlier this year by KPMG showed almost a quarter of British mortgage holders were considering selling and moving to a cheaper property due to the surge in financing costs.

Slowly declining borrowing costs have injected more optimism into Britain’s housing market in recent weeks. The BOE said that some 440,000 households will find it difficult to meet their debt repayments by the end of 2024, down from its July estimate of 650,000 by the end of this year.

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What’s more, two of the nation’s biggest mortgage lenders — Halifax and Nationwide — both reported unexpected increases in house prices this month, buoyed by slightly cheaper borrowing. Halifax did note, however, that Britain’s housing shortage was underpinning values, even throughout this year’s property downturn.

“It remains to be seen if the recent rate reductions will continue, as any further rises in inflation, base rate, or swap rates may lead to a reversal,” Moneyfacts’ Hyde said.

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