British homebuyers have been awarded a win as typical two-year fixed mortgage rates haven fallen below five per cent for the initial occasion since the financial crisis triggered by former Prime Minister Liz Truss’s mini-Budget.
Financial data provider Moneyfacts reported that Wednesday’s average rate for two-year fixed homeowner mortgages reached 4.99 per cent, declining from five per cent on the preceding business day.
Mortgage rates have fallen to pre-Liz Truss levels
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Under the Conservative mini-Budget, delivered by then-chancellor Kwasi Kwarteng in September 2022, an unprecedented disruption in the economy was unleashed across Britain’s financial markets.
The announcement, which formed part of a broader economic growth strategy, incorporated £45billion worth of tax reductions without corresponding funding measures.
Financial markets responded with immediate volatility, driving borrowing costs sharply upward. By October 20 2022, typical two-year fixed mortgage rates had soared to 6.65 per cent, representing their zenith during this period of instability.
This dramatic surge in lending rates forced numerous prospective buyers from the market whilst existing homeowners faced substantially higher repayment costs when remortgaging.
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Adam French, the head of news at Moneyfactscompare.co.uk, described the development as “a symbolic turning point” for the mortgage market.
He noted that whilst borrowing costs remain significantly elevated compared to the exceptionally low rates experienced in the years before the 2022 fiscal event, this threshold represents increased competition amongst lenders seeking new business.
French cautioned that borrowers anticipating more meaningful reductions might face disappointment.
Furthermore, he highlighted that inflation projections suggest a rise to four per cent during autumn, with the two per cent target potentially remaining elusive until 2027 or later.
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Based on this outlook, the mortgage expert noted that the base rate will likely maintain its present position for an extended period.
The recent reduction in the Bank of England’s base rate from 4.25 per cent to four per cent last week may provide some relief for borrowers facing renewed mortgage arrangements.
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UK Finance data indicates that throughout 2025, approximately 1.6 million fixed-rate mortgage agreements will reach their conclusion, with 900,000 of these terminating in the year’s second half.
These households will transition from rates secured before the market upheaval to current market conditions, though the sub-five per cent threshold represents an improvement from recent peaks.
The base rate adjustments could moderate the financial pressure on borrowers negotiating new terms, although rates remain substantially above pre-2022 levels.
Earlier this month, the Bank of England’s Monetary Policy Committee (MPC) voted to slash the base rate from 4.25 per cent to four per cent.
