The mini-Budget was delivered three years ago, but continues to cast a long shadow over mortgage rates, with short-term rates still higher than when then-Chancellor Kwasi Kwarteng stood at the despatch box.  

The Liz Truss (pictured) Conservative government, which lasted less than two months, set out plans for £45bn of unfunded tax cuts on 23 September 2022. 

The move sparked a meltdown across UK financial markets that led to hikes in mortgage rates, a fall in the value of the pound, the danger of widespread failure across the pensions industry and rises in the cost of UK government borrowing.     

In the home loans market, the average two-year fixed rate on the day before the fiscal event was 4.70%, and peaked at 6.86% on 26 July 2023, according to Moneyfacts data. Currently, the average two-year fixed rate is 4.99%. 

The average five-year fixed rate the day before the mini-Budget was 4.70%, peaking at 6.51% on 20 October 2022. Currently, the average five-year is 5.02%. 

Hargreaves Lansdown head of personal finance Sarah Coles says: “An awful lot of homeowners are haunted by memories of the mini-Budget.  

“Those who were buying or remortgaging at the time had to wrestle with runaway mortgage rates.  

“They were rising so fast that lenders ended up withdrawing them for a period, because they were impossible to price. When they returned, higher rates meant huge hikes in monthly payments.” 

Coles adds: “For sellers, the picture was just as bleak, as sales dried up overnight, and house prices fell.  

“House price inflation dropped from a rise of 9.5% to a fall of 5.3% over the course of the following year.  

“Those who had bought since 2013 had only ever experienced a rising market before, and those who had bought since the financial crisis had never lived through dramatic overnight changes at this level.” 

However, AJ Bell head of investment analysis Laith Khalaf points out that rises in UK bond markets earlier this month should not overly affect home loan pricing. 

UK borrowing costs hit a 27-year high on 2 September, as the yield on 30-year government bonds jumped to 5.698%, the highest level since 1998.   

By contrast, the 30-year government bond yield, at the height of the mini-Budget crisis, closed at 5% on 27 September 2022.   

Khalaf says: “The nature of the recent sell-off in gilts looks to be centred around the long end of the market, while in 2022 it was all across the curve.  

“This is significant, particularly in the two-year and five-year gilt market, which reflect short-term interest rate expectations that feed through into mortgage pricing.  

“These are currently lower than during the mini-Budget crisis and more stable.”