The average two-year fixed-rate mortgage has dipped below 5 per cent for the first time since before Liz Truss’s mini-budget in September 2022, according to financial information website Moneyfacts.
On Wednesday, the average two-year fixed homeowner mortgage rate was recorded at 4.99 per cent, down from 5.00 per cent the previous working day.
This marks the first time the rate has been below 5 per cent since September 29, 2022, when it stood at 4.87 per cent.
Adam French, head of news at Moneyfactscompare.co.uk, called the move "is a symbolic turning point".
Mr French continued: “While the cost of borrowing is still well above the rock-bottom rates of the years immediately preceding that fiscal event, this milestone shows lenders are competing more aggressively for business.
“However, while mortgage rates have followed the mood music set by successive cuts to the Bank of England base rate, homeowners and first-time buyers may have to wait longer for more substantial cuts.
Inflation is forecast to spike at 4 per cent in the autumn and not return to its 2 per cent target until 2027 or beyond, which is likely to mean the base rate will hold around its current level for longer.”
Ms Truss’s chancellor, Kwasi Kwarteng, announced a spending review in 2022, which included £45bn in unfunded tax cuts and caused turmoil in the UK financial markets.
Mortgage rates surged after the September 2022 statement, delivered as part of a “growth plan”.
On 20 October 2022, the average two-year fixed-rate mortgage hit a peak of 6.65 per cent, amid the market volatility.
According to UK Finance, about 900,000 fixed-rate mortgage deals are due to expire in the second half of 2025, with 1.6 million fixed deals having ended or are due to end across the whole of the year.
Recent Bank of England base rate cuts could help to ease cost pressures on some borrowers, with last week’s reduction in the base rate taking it from 4.25 per cent to 4 per cent.
