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BBC business reporter Tom Espiner has reported that the average two-year mortgage rate has fallen below 5% for the first time since the mini-budget announced by former Prime Minister Liz Truss in September 2022. Moneyfacts data reveals that the rate now stands at 4.99%, marking a significant milestone for homebuyers as lenders intensify their competitive efforts in the market.
Despite a series of interest rate cuts since last August, the recent split vote among Bank of England policymakers has cast uncertainty over the possibility of further reductions this year. A Moneyfacts spokesperson noted that while mortgage rates have aligned with the Bank’s rate cuts, significant declines are not expected in the near future.
The article highlights that mortgage rates remain significantly higher than the record-low rates observed prior to Truss’s mini-budget. The fiscal measures announced by Truss’s chancellor Kwasi Kwarteng, including £45bn in unfunded tax cuts, led to upheaval in UK markets. Consequently, the cost of UK government borrowing increased, resulting in a spike in mortgage rates that reached levels not seen since the 2008 financial crisis by July 2023.
Recent forecasts by the Bank of England indicate that inflation is set to surpass expectations, with a projected spike to 4% in September before moderating to 2% by 2027. Moneyfacts anticipates that this inflationary pressure will likely maintain the base rate at its current level of 4% for an extended period following the recent cut
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