Average mortgage rates fell by 0.12 percentage points in July 2026 to reach 5.47% — the sharpest monthly decline since October 2024, according to Moneyfacts data published on 13 July. Two-year and five-year fixed rates both fell, and the total number of mortgage products available rose for a third consecutive month. For contractors thinking about a remortgage or a first purchase, the direction of travel is encouraging — but there is a significant catch in how the market works for day-rate earners.
The headline figures
| Rate type | Previous month | July 2026 | Change |
|---|---|---|---|
| Average new mortgage rate | 5.59% | 5.47% | −0.12% |
| Two-year fixed average | 5.68% | 5.52% | −0.16% |
| Five-year fixed average | 5.63% | 5.52% | −0.11% |
| Total products available | 7,132 | 7,177 | +45 |
The two-year fixed average of 5.52% is the lowest it has been since early March 2026. Notably, the two-year and five-year averages now sit at the same level, largely eliminating the inversion that persisted from April through June — when five-year rates were meaningfully cheaper than two-year rates, an unusual position that made longer fixes look more attractive for most borrowers.
Why product count matters
The rise to 7,177 available mortgage products might seem like background noise, but for contractors it is relevant. A larger product count means more lenders are actively competing for business — including lenders who are willing to underwrite day-rate income correctly. When the market contracts, specialist and near-prime lenders tend to pull products first. An expanding market is generally a better environment for contractor applicants.
The catch for contractors: not all these rates are accessible to you
When mainstream media reports that “mortgage rates have fallen,” they are reporting averages across the entire product range. Many of the lenders represented in those figures assess income on a standard employed/self-employed basis — using SA302 forms, three years of accounts, or a payslip. If you work through a limited company and take income as salary and dividends, or if you are assessed on a contract day rate, a significant portion of the headline rate range simply does not apply to your application.
The lenders who do accept day-rate contractor income — typically by annualising your contract rate and applying it directly, rather than averaging your tax returns — have also repriced downward this month. But the best available rate for a contractor is not the average headline rate; it is the best rate among the subset of lenders whose criteria you actually meet.
That subset varies by:
- Whether you are inside or outside IR35
- Your contract duration and renewal history
- Whether you have a current contract in place or are between assignments
- Your day rate and the size of the mortgage you need
- Your credit history and existing commitments
Running a comparison on a public rate table does not surface this information. A broker who works regularly with contractor applicants will know which of the currently-repriced deals are actually reachable for your profile.
Is now a good time to remortgage?
That depends on when your current deal ends. If you are coming off a fix within the next three to six months, you can typically lock in a rate now and secure a better deal if rates fall further before your completion date — most lenders allow you to switch to a cheaper product within the offer period. Starting the process now gives you options; waiting until your current deal expires limits them.
If your fix does not end for a year or more, the maths of early repayment charges and the direction of swap rates need to be assessed against your specific deal. A broker can run that comparison against your current mortgage terms.
Thinking about remortgaging now rates are falling? Get a free contractor mortgage assessment from Day Rate Finance.
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