The average rate for a two-year fixed mortgage dropped marginally to 4.66% from 4.68% last week, according to data from Uswitch

In a week marked by the autumn budget announcement, Nationwide has announced a reduction in mortgage rates, effective this Friday. Meanwhile, other major UK lenders have opted to maintain their current rates.

The average rate for a two-year fixed mortgage dropped marginally to 4.66% from 4.68% last week, according to data from Uswitch. The average five-year fixed deal edged lower to 5.03% from 5.05%. Those are the average rates on a 75% loan-to-value (LTV) mortgage, meaning buyers need to have at least 25% for a deposit.

UK inflation fell for the first time five months, declining to 3.6% on annual basis, raising hopes that the Bank of England (BoE) will cut interest rates in December from 4%. The central bank’s base rate influences those set by lenders so another rate cut would be welcome news for mortgage borrowers.

Meanwhile, the recent budget unveiled measures that could impact UK homeowners. A mansion tax on properties valued over £2 million will add an annual surcharge starting at £2,500, rising to £7,500 for homes worth more than £5 million, set to take effect in April 2028. Additionally, a reduction in the Cash ISA limit has raised concerns in the mortgage industry. Some experts fear that this change could dampen the amount of money building societies have available to lend to homebuyers, potentially tightening the availability of credit.

Craig Fish, director at Lodestone Mortgages, warned that slashing cash ISA allowances could have a knock-on effect: Building societies rely on cash deposits to fund key parts of the market. Reducing the savings pots means less money available for lending, which could lead to tighter lending and higher rates.

Morningstar DBRS said the outlook remained challenging. With the Office for Budget Responsibility forecasting average mortgage rates to climb from 3.7% to 5% over the next five years, affordability will continue to erode — particularly when combined with stagnant real incomes and tightening monetary conditions.

It said: The buy-to-let sector faces a ‘perfect storm’, and the inevitable result will be a contraction in rental supply and a subsequent spike in rental prices.