Mortgage rates have hit their lowest levels since the turmoil following Liz Truss’s mini-budget, marking an end to a challenging two-year period for homeowners and buyers.

NatWest is now offering a 3.83 percent five-year fixed-rate mortgage, the lowest rate since late September 2022, according to broker L&C.

As seven of the UK’s ten largest lenders offer fixed-rate deals below 4 percent, a price competition among banks has been ignited by the Bank of England’s base rate reduction from 5.25 percent to 5 percent, combined with a drop in inflation. Notable lenders cutting their rates include Barclays, Halifax, HSBC, and Nationwide Building Society.

The reduction in mortgage rates over the previous two months has brought significant financial relief to buyers. For example, a £200,000 25-year loan initially costing £1,091 per month at the beginning of June is now reduced to £1,037 per month, saving borrowers £648 annually. This decrease occurs as inflation, though having risen from 2 percent in June to 2.2 percent last month, remains below forecasts and has dropped from January’s 4 percent.

The most substantial rate cuts are aimed at buyers, as banks strive to revive a property market hit by higher borrowing costs.

Mark Harris, CEO of mortgage broker SPF Private Clients, noted that many homeowners had postponed moving due to uncertainties about house prices and higher mortgage rates. “With the base rate now cut and fixed rates falling, there is a greater desire to move, and we are witnessing this trend,” he said.

However, first-time buyers should be aware of potential increases in stamp duty if they delay their purchase hoping for lower rates. Starting in April, the stamp duty threshold for first-time buyers at the 5 percent rate will drop from £425,000 to £300,000. Rightmove reports a 19 percent increase in the number of potential buyers contacting estate agents compared to last year, with a 16 percent increase in sales agreements.

Tim Bannister, a data analyst at Rightmove, remarked, “The recent Bank rate cut, the first since 2020, has spurred a late-summer boost in buyer activity. This positive change in sentiment is likely influenced by the long-anticipated rate cut and decreasing mortgage rates.”

He added, “As summer ends, the conditions appear favorable for a more active autumn market.” Rightmove predicts a 1 percent rise in asking prices this year following a 1 percent decline due to the renewed buyer interest.

Tom Bill from Knight Frank estate agency stated, “With a rate cut and lower-than-expected inflation, August could be pivotal for the UK housing market. As more sub-4 percent mortgages become available, we anticipate stronger trading volumes this autumn compared to 2023.”

Following Truss’s mini-budget on September 23, 2022, mortgage rates soared. The £45 billion in unfunded tax cuts expected to drive inflation forced the Bank of England to hike interest rates, causing the average two-year fixed-rate mortgage to rise from 4.24 percent on September 1 to 6.47 percent on November 1, as per Moneyfacts. This increased monthly repayments on a £200,000 25-year mortgage by £265 to £1,347. Similarly, the average five-year fix rose from 4.33 percent to 6.32 percent during the same period.

Although rates slightly decreased after Truss resigned and the proposed tax cuts were scrapped by then-chancellor Jeremy Hunt, they never returned to pre-September 23 levels.

Mortgage rates climbed further the following summer, peaking at 6.85 percent for a two-year fix on August 1 and 6.37 percent for a five-year fix due to unexpectedly high CPI inflation. Since then, rates have been slowly declining but remain significantly higher than over the past decade, when the Bank of England’s base rate was below 1 percent, allowing for mortgage rates around 2.5 percent or lower.

According to the Financial Conduct Authority, 474,351 homeowners face the end of their mortgage deals between September and December.

Falling rates are expected to ease this financial burden somewhat. The lowest remortgaging offer is currently a 4.06 percent five-year fix from Barclays.