Mortgage rates below 5% for first time since Truss budget

The average two-year mortgage rate has dipped below 5% for the first time since former Prime Minister Liz Trusss mini-budget in September 2022, figures show.

The rate has dropped to 4.99%, according to Moneyfacts, which described it as a "symbolic turning point" for homebuyers and shows lenders are "competing more aggressively".

Interest rates have been cut five times since last August but at the Bank of Englands last meeting, a split vote between policymakers raised questions about whether there would be another reduction this year.

A Moneyfacts spokesperson said that although mortgages are following the "mood music" set by the Banks rate cuts, they are unlikely to fall substantially.

Mortgage rates are still "well above the rock-bottom rates of the years immediately preceding" the mini-budget, according to Moneyfacts.

Unveiled by Trusss short-lived chancellor Kwasi Kwarteng, the so-called mini-budget set out £45bn in unfunded tax cuts, causing UK market turmoil.

It pushed up the cost of UK government borrowing, which fed through into mortgage rates. By July 2023, the borrowing cost of mortgages had soared to the highest level since the 2008 financial crisis.