The turmoil in the stock market may have a silver lining for homeowners: it raises the chance that interest rates have peaked.

Mortgage lenders have already started to cut rates on their fixed deals, with Britannia building society, Halifax and Royal Bank of Scotland all announcing reductions in recent weeks.

Until last week another hike to 6 per cent was thought to be a done deal. However, speculation that UK rates won’t need to rise again was sparked by news that inflation had tumbled below the Bank of England’s 2 per cent target for the first time in more than a year. The consumer prices index, the government’s preferred measure, dived to 1.9 per cent in July, a sharp drop from June’s level of 2.4 per cent and well below analysts’ forecasts of 2.3 per cent.

The benign view of inflation was reinforced by official figures showing that the pace of pay increases, which earlier this year was a potential threat to inflation, had dropped sharply. Wage hikes are at their slowest in four years, at an annual rate of 3.3 per cent.

Then it was revealed that the Bank of England’s monetary policy committee, which sets rates, had voted unanimously to peg Bank rate this month and had “no firm view” on whether it would need to rise further.

Simon Ward, economist at New Star Asset Management, said: “The unanimous vote to leave rates unchanged in August, coupled with the dramatic inflation drop and a surprise further fall in average earnings growth, strengthens our belief that interest rates have peaked for the year at 5.75 per cent.”

The turmoil in financial markets has also made an imminent rate rise even less likely as the Bank is unlikely to want to push up rates when confidence has been so badly shaken.

Although the chance of a further rate hike has slipped, 32 out of 53 economists questioned in a Reuters poll still expect rates to rise one more time to 6 per cent. Twenty out of 53 believed that rates had peaked.

Economists warn that the impact of recent floods on food prices could yet lead to an equally sharp rebound in the pace of price increases.

Vicky Redwood at Capital Economics, a consultancy, said: “While the sharp drop in inflation and the dovish tone of the MPC minutes have made the outlook for interest rates less clear-cut, we still think that one more hike later this year remains likely, but a September move now looks out of the question.”

Borrowers looking for a fixed rate are already benefiting from the shift in the interest-rate outlook as a number of lenders have introduced cheaper deals.

Lenders base their fixed deals on so-called swap rates, which reflect the City’s expectations of the future level of Bank rate. Over the past week alone, two-year swap rates have dropped from 6.2 per cent to 6.09 per cent.

Britannia cut its whole range of fixed deals last week: its two-year fix was chopped to 5.75 per cent from 5.99 per cent and its five-year offer is down at 5.89 per cent from 6.19 per cent. Royal Bank of Scotland and Halifax have also recently announced cuts, with brokers expecting more lenders to follow suit.

James Cotton at L&C, a mortgage broker, said: “Fixed mortgage rates have already started to drop as the markets have become less convinced that another rate hike is necessary. Even cheaper deals could begin to appear over the next couple of weeks if swap rates drop even further.”

Fixed-rate deals are a sensible choice for people on a tight budget. Newcastle building society offers the cheapest two-year fix at 5.37 per cent, but it comes with a hefty arrangement fee of £1,599. Cheshire has a 5.69 per cent fix with an £899 fee, which may work out less expensive for smaller loans.

However, if you want the cheapest deal and are prepared to take a risk, brokers say the time is right to take out a discount or tracker mortgage.

Melanie Bien at Savills Private Finance said: “Even if there is one more increase in Bank rate the best tracker deals should work out cheaper.” Birmingham Midshires is offering a two-year discounted tracker at 0.76 per cent below the Bank of England base rate, giving a rate of 4.99 per cent. If rates went up another quarter point you would pay 5.24 per cent, still cheaper than the best fix.

The downside of the deal is that it has 2 per cent arrangement fee. Percentage fees based on how much you borrow are usually only worth paying on small loans, which is why the deal is not in our table. Someone borrowing £250,000 would have to pay £5,000 just to set up the mortgage.

Cooperative Bank has the next cheapest two-year tracker at 5.14 per cent, with a £999 fee. The deal includes free valuation and legal work for remortgages. The cheapest lifetime tracker from Leek United charges 0.1 per cent above Bank rate, giving a rate of 5.85%. It has a £595 fee and includes a free valuation.

James and Katherine Coleman, pictured with daughters Madeleine, two, and Lucy, 11 months, are remortgaging to a two-year tracker rate from Alliance & Leicester which charges 0.31 per cent below Bank rate or 5.44 per cent with a £599 fee.

James, a tax consultant from Chalfont St Giles, Buckingham-shire, believes there is a good chance rates won’t move up to 6 per cent, as many economists expec, and hopes they could fall during the mortgage term.

He said: “If interest rates start to fall I want to be able to benefit. Of course, I could be wrong. But even if rates move up another quarter or even half point, the loan would still be affordable – it’s definitely worth the risk.”