A Welcome Milestone: For the First Time Since the Truss Budget, Average Mortgage Rates Drop Below 5%
Published: August 13, 2025
In a piece of news that will bring a sigh of relief to homebuyers and homeowners across the UK, average two-year fixed mortgage rates have finally dipped below the 5% mark. This is a significant psychological and financial milestone, the first time we’ve seen such rates since the market turmoil that followed the mini-budget of September 2022.
A Quick Recap: How Did We Get Here?
It’s hard to forget the financial chaos of late 2022. The "mini-budget" announced by then-Prime Minister Liz Truss and her chancellor sent shockwaves through the financial markets. The result was a rapid loss of confidence, which caused the cost of borrowing for lenders to skyrocket. In turn, mortgage rates surged, reaching a peak of over 6.6% and leaving thousands of potential buyers and those needing to remortgage in a state of high anxiety.
Since then, the path back to stability has been a slow and steady climb. Thanks to concerted efforts to control inflation and a more predictable economic approach, we've seen the Bank of England begin to ease its base rate. This has paved the way for lenders to compete more aggressively, finally pushing the average two-year fixed rate back to a more palatable 4.99%.
What Does This Mean for You?
This is undeniably good news, but what it means in practice depends on your circumstances.
- For First-Time Buyers: The dream of homeownership just became a little more attainable. A lower interest rate can make a significant difference to monthly payments, potentially allowing you to borrow more or simply making that first step onto the ladder more affordable. If you're looking to make your move, now is a fantastic time to explore your options. You can learn more at our dedicated First-Time Buyer page.
- For Homeowners Needing to Remortgage: With around 900,000 fixed-rate deals expected to end in the second half of 2025, this news couldn't come at a better time. While the new rates are still higher than the sub-2% deals many are leaving, dropping below 5% lessens the "payment shock" and provides much-needed breathing room.
- For Home Movers: If you've been waiting for a sign to make your next move, this could be it. Lower rates can improve affordability, making that larger family home or dream downsize a more realistic prospect.
"Even with falling rates, the market is complex. The gap between the best available rates and the average is significant. This is where expert advice becomes invaluable."
Navigate the New Normal with an Award-Winning Expert
While the headlines are positive, it's crucial to remember that the "average" rate isn't the rate everyone gets. Lenders still have varied criteria, and the very best deals are often reserved for those with specific circumstances.
This is where our experience makes all the difference. With 27 years in the market and 7 UK best broker awards, our team at Acorn.mortgage has the deep industry knowledge to navigate this landscape for you. We don’t just find you a mortgage; we find you the right mortgage for your unique situation, giving you clarity and confidence.
Whether you're a first-time buyer excited by this news or a homeowner looking to secure the best possible remortgage deal, we're here to help. Let our award-winning team guide you through your next move.
