Rates now lowest since 2022, before Liz Truss' infamous budget triggered a surge
The average two-year fixed rate mortgage has dropped below 5% for the first time since September 2022, according to data from price comparison site Moneyfacts.
The financial information provider reported that the average rate for a two-year fixed homeowner mortgage stood at 4.99% on Wednesday, down from 5% on Tuesday.
This marks the first occasion in nearly three years that the rate has fallen below the 5% threshold, when it was recorded at 4.87%. The period following September 29, 2022 saw mortgage rates rise sharply, reaching a peak of 6.65% on October 20, 2022, after the government’s mini budget led to significant market disruption.
“This is a symbolic turning point,” said Adam French, head of news at Moneyfactscompare.co.uk. “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% in the autumn and not return to its 2% target until 2027 or beyond, which is likely to mean the base rate will hold around its current level for longer.”
Mortgage rates below 5% for first time since Truss budget https://t.co/E2dNmewBY7
— BBC News (UK) (@BBCNews) August 13, 2025
The surge in mortgage rates followed the September 2022 fiscal announcement by then chancellor Kwasi Kwarteng, which included £45 billion in unfunded tax cuts. The measures triggered volatility in UK financial markets and led to higher borrowing costs for homeowners.
Some stability has returned to the mortgage sector as the average two-year fixed mortgage rate has dropped below the average five-year fixed rate. While the difference between the two rates had been shrinking over the past months, last week marked the first occasion since September 2022 that the average two-year fixed rate is lower than its five-year counterpart.
Alan McKenzie, of Your Next Step Mortgage, told Mortgage Introducer: "This news is fantastic. Seeing two-year fixed mortgage rates dip below 5% is a real breath of fresh air. There's something genuinely reassuring about watching rates slide from the 5s to the comfortable mid-4s. The repeated lender updates announcing rate cuts are particularly encouraging, especially for borrowers monitoring the market.
"It’s also a testament to good practice that most lenders allow offers to be revised easily, protecting clients and helping them capitalise on better deals swiftly. However, those that make amending offers difficult really ought to rethink their approach, agility is everything in this environment. Overall, this shift feels like a turning point, excellent news for borrowers, and an opportunity for brokers to reinforce their value in guiding clients through these changing tides."
Industry data from UK Finance indicates that around 900,000 fixed rate mortgage agreements are set to expire in the second half of 2025, with a total of 1.6 million fixed deals ending or due to end during the year. Recent reductions in the Bank of England’s base rate, including last week’s cut from 4.25% to 4%, may also provide some relief for borrowers facing higher costs.
For mortgage brokers, the dip in fixed mortgage rates could result in increased activity as more clients seek advice on refinancing or securing new deals. With a significant number of fixed-rate mortgages expiring in 2025, brokers are likely to see heightened demand for guidance, especially as recent base rate cuts may offer borrowers improved options amid changing market conditions.
Rikesh Tailor, of Mortgage Knight, agreed that the drop will make it easier to engage with clients. "It’s great to see this change and marks a symbolic shift in rates where shorter-term rates are cheaper then longer-term rates. This is a positive change from the market turmoil of September 2022. What this means for us is more opportunity to speak with clients and to provide more meaningful savings on their mortgage."
Richard Alton, of Alton Mortgages, added that this was welcome news amid some doom and gloom economic data. "I believe over time [rates] will continue to reduce but at a lower rate than some might believe or indeed have hoped. The Bank of England has forecast inflation to reach 4% over the coming months, and we have also had mixed signals about the economy with sluggish growth. The key message from us is that is good news rates are reducing as this does give buyers confidence and enables better deals when re-mortgaging."
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