Mortgage rates have fallen to their lowest levels since the aftermath of the Liz Truss mini-budget, signalling an end to two years of pain for homeowners and buyers.

NatWest is offering a 3.83 per cent five-year fixed rate, the lowest available fixed-rate mortgage since the end of September 2022, according to the broker L&C.

Seven of the country’s ten largest lenders are now offering fixed-rate deals below 4 per cent after the Bank of England’s base rate cut from 5.25 per cent to 5 per cent and a falling rate of inflation spurred a price war between banks. Other lenders to have cut their rates include Barclays, Halifax, HSBC, and Nationwide Building Society.

The mortgage rate cuts over the past two months have made buyers hundreds of pounds a year better off. At the start of June, the lowest five-year fix was 4.32 per cent from Barclays. Someone who took out a £200,000 25-year loan would now pay £1,037 a month, down from £1,091. This equates to £648 less a year.While the consumer price index measure of inflation rose from 2 per cent in June to 2.2 per cent last month, it was lower than had been forecast, and down from 4 per cent in January.

The biggest mortgage rate cuts have been on deals for buyers as banks have sought to inject life into a property market dented by the higher cost of borrowing.

Mark Harris, chief executive of the mortgage broker SPF Private Clients, said many homeowners had delayed potential moves over the past two years because of concerns over house prices and more expensive mortgages.

He said: “With the base rate now cut and fixed rates falling, there is a greater desire to move and we are seeing this already.”

However prospective first-time buyers who hold off in the hope of much cheaper rates need to be aware they might end up paying more stamp duty. From April the threshold above which first-time buyers pay stamp duty at a rate of 5 per cent will fall to £300,000, down from the £425,000 level introduced in the mini-Budget. The property portal Rightmove said the number of prospective buyers contacting estate agents was 19 per cent higher than in the same period last year. It said the number of sales agreed is up 16 per cent compared with last year.

Tim Bannister, a data analyst at Rightmove, said: “The first Bank rate cut since 2020 has sparked a welcome late-summer boost in buyer activity. The fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment.

“As the summer holiday season comes to an end, the conditions are there for a more active autumn market.”

Rightmove now expects asking prices to rise by 1 per cent this year, following a 1 per cent fall, as a result of buyers returning to the market.

Tom Bill, from the estate agency Knight Frank, said: “A rate cut and lower-than-expected inflation means August could be a pivotal month for the UK housing market and as more sub-4 per cent mortgages appear, trading volumes should be notably stronger this autumn than in 2023.”

Mortgage rates rose rapidly in the aftermath of Truss’s mini-budget on September 23, 2022 because the £45 billion in unfunded tax cuts it contained were forecast to drive inflation and force the Bank of England to hike interest rates.

The average two-year fixed-rate deal rose from 4.24 per cent on September 1 to 6.47 per cent on November 1, according to the financial data firm Moneyfacts, increasing monthly repayments on a £200,000 25-year mortgage by £265 to £1,347. The average five-year fix rose from 4.33 per cent to 6.32 per cent over the same period.

While rates came down slightly after Truss resigned after just 45 days in office, and the proposed tax cuts were scrapped by Jeremy Hunt, the chancellor at the time, they never returned to the levels seen before September 23.

Average mortgage rates peaked even higher the following summer, at 6.85 per cent for a two-year fix on August 1 and 6.37 per cent for a five-year fix, because of worse than expected CPI inflation.

Rates have slowly been coming down since, although they are still much higher than they have been for most of the last ten years when the Bank of England base rate was below 1 per cent and millions took out loans at rates of 2.5 per cent or below.

Some 474,351 homeowners’ deals are due to end between September and December, according to the Financial Conduct Authority.

Falling rates are expected to soften the blow somewhat. The lowest remortgaging deal is now 4.06 per cent from Barclays on a five-year fix.