The average two-year fixed mortgage rate has fallen to its lowest point since before September 2022 – the month of Liz Truss’s infamous mini-Budget – new data shows.
It comes as lenders continue to make cuts to home loans following a reduction in the interest rate last week.
Average two-year mortgage rates are now 5.18 per cent, according to Moneyfacts, however are still much higher than the low of 4.24 per cent in September 2022.
This was the month of the mini-Budget in which the then-prime minister announced some of biggest tax cuts since 1972 which led to UK government borrowing costs to spike and the pound to dive.
Interest rates – and therefore mortgage rates – rose as a result and have still not yet recovered.
Five-year fixed mortgages were previously lower in November 2024 at 5.09 per cent but now still sit at 5.1 per cent.
However, there are many cheaper deals available on the market following the Bank of England cutting rates to 4.25 per cent last week, leading to a slew of providers making reductions to their two- and five-year fixes.
Barclays is the latest major lender to make cuts with a two-year fixed rate of just 3.85 per cent available as of tomorrow (13 May).
The lowest rate is Nationwide’s 3.84 per cent two-year fix – however it comes with a large £1,499 fee – and is available for buyers with 40 per cent deposit or equity.
Two-year deals are also available from Lloyds at 3.75 per cent, although they require customers to be Club Lloyds members.
Some cheaper deals are also available from Halifax for those remortgaging too, including a two-year fix at a rate of 3.79 per cent for those remortgaging with equity of 40 per cent or more of their property value.
Rachel Springall, finance expert at Moneyfacts, said: “The momentum of rate cutting was rife throughout April, with lenders rushing to tweak their mortgage ranges.
Mortgage rates are coming down as the base rate is falling“Such vigorous activity led to notable cuts to the overall average two- and five-year fixed mortgage rates, seeing the biggest monthly fall to the two-year fixed rate in over six months.
“Borrowers looking for a new deal may also be pleased to see the average two-year fixed rate has reached a notable milestone, falling to its lowest point recorded since the start of September 2022, before the notorious mini-Budget, or fiscal announcement.”
Since the start of October 2022, the average two-year fixed rate has been higher than the five-year rate.
However, borrowers who are worried about rate volatility in the months ahead may still prefer a five-year fixed deal to secure their rate for longer, particularly as the overall average rate is at its lowest point for six months.
There is more positive news for borrowers with smaller deposits, with the average two-year fixed mortgage for those with 10 per cent deposit or equity dropping to its lowest point since October 2022 at 5.33 per cent.
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Experts have said although rates may not increase in the near future, this could change depending on inflation and wage growth figures.
Swap rates, which follow predictions for where the Bank of England base rate will go in the future, and are what mortgage lenders base their pricing on, have also increased a little this week.
Nick Mendes of brokers John Charcol said: “Swap rates have edged up slightly following last week’s [Bank of England’s] Monetary Policy Committee meeting and the announcement of the trade deal [with the US].
“The division among committee members clearly indicates a lack of consensus, providing little clarity on the future direction of interest rates.
“As ever, the [Bank of Englad] governor has stressed that decisions will remain data dependent. In my view, this suggests we are more likely to see three rate cuts this year rather than the four that had previously been priced in.
“Based on current mortgage rate pricing and lender margins these adjustments shouldn’t result in any lenders repricing upwards as a result.”
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