UK Mortgage Rates Dip to Lowest Since 2022 Truss Crisis—A Glimmer of Relief or a False Dawn?

The UK’s mortgage market has seen a marginal reprieve in April 2025, with rates edging down to their lowest levels since the 2022 fiscal turmoil triggered by former Prime Minister Liz Truss’s brief tenure. Yet, as borrowers and investors assess the landscape, the data reveals a complex picture: rates remain stubbornly elevated compared to pre-crisis lows, and underlying pressures suggest caution is still warranted.

Current Rates and Historical Context

In April 2025, the average five-year fixed-rate mortgage sits at 5.17%, while two-year deals average 5.32%—a slight dip from earlier 2025 highs but still starkly higher than the 1.49% two-year rate recorded in March 2022. The Bank of England’s base rate, now at 4.5%, is projected to fall to 3.75% by year-end, driven by three expected rate cuts. However, lenders have been slow to pass these reductions onto borrowers, as fixed-rate mortgages are tied to SONIA swap rates, which remain elevated due to lingering inflation fears and geopolitical risks.

Market Drivers: SONIA, Inflation, and Geopolitics

The stability of SONIA swap rates—currently 3.75% (5-year) and 3.72% (2-year)—reflects lenders’ cautious outlook. These rates, which underpin fixed-mortgage pricing, have barely budged since mid-2024 despite base rate cuts. Lenders are reluctant to lower rates further due to unresolved inflationary pressures and global uncertainties, such as U.S. tariff policies and energy market volatility.

Meanwhile, inflation, which peaked at 11% in October 2022, has retreated to 2.6% by March 2025—a welcome trend but one that still exceeds the Bank’s 2% target, keeping downward pressure on rates muted.

Impact on Borrowers: A Mixed Picture

While the April dip offers some respite, the pain of the past three years remains acute. A borrower with a £200,000 mortgage on a two-year fixed deal at 5.32% would pay £1,181 monthly, versus £850 at the 2022 rate of 1.49%. This 40% jump in monthly payments underscores the 329% increase in rates since 2022. Even the recent decline—e.g., Santander’s two-year rate dropping to 3.97%—yields minimal savings, with a £10 monthly reduction over 25 years.

Structural Factors: Why Rates Stay Elevated

The persistence of high rates stems from two structural shifts. First, lenders now factor in higher risk premiums due to inflation’s lingering scars and geopolitical instability. Second, the shift to SONIA-based pricing—replacing the old LIBOR system—has made mortgage rates more sensitive to short-term interest rate expectations. This means even minor dips in base rates may not translate to immediate relief for borrowers.

Conclusion: A Fragile Reprieve

The April 2025 dip in UK mortgage rates offers a fleeting moment of optimism, but it is no cause for complacency. Rates remain more than triple their 2022 lows, and the path forward hinges on whether inflation truly settles and geopolitical risks abate. Investors in mortgage-backed securities or real estate should note that lenders’ caution and SONIA’s grip will likely keep rates elevated even as the Bank of England eases policy.

For borrowers, the math is grim: a £200,000 mortgage at today’s rates costs £140,000 more over 25 years compared to 2022 terms. With forecasts predicting further minor cuts but no return to pre-crisis affordability, the era of cheap mortgages is likely over—a reality that will shape UK housing markets and investment strategies for years to come.

In short, the UK mortgage market’s “lowest since Truss” moment is a milestone, but one that highlights the enduring scars of inflation and the limits of monetary policy. For now, relief remains a relative term.