One year on – Where Has The Mini Budget left the Mortgage Market?

It’s one year since Liz Truss and Kwasi Kwarteng’s ill-fated Mini Budget, a £45 billion tax cutting package, paid for by increased public borrowing.

For many of us, the fallout of this fiscal event will be burned into our memories. Who can forget, for example, the pound crashing to its lowest level against the dollar in 37 years or the Bank of England buying £65 billion of government debt to stop some pension funds collapsing?

Or maybe it’s the swift sacking of Kwarteng, who was followed out the door a few days later by Truss, thereby becoming the UK’s shortest-serving prime minister in history, that sticks in your memory.

But for most people, it will be the impact on mortgages that we remember, as the Mini Budget led to many lenders taking mortgage products off the market. In fact, a record 935 home loans were withdrawn on Tuesday 27th September 2022, according to Moneyfacts – more than double the previous record set on April 1st 2020.

The government has been able to restore a modicum of stability since Rishi Sunak took over as prime minister, with Jeremy Hunt as his chancellor.

However, the legacy of the Mini Budget still lingers on, with many mortgage holders still facing huge financial pressures, and aspiring homeowners finding their dreams increasingly hard to achieve.

So where are we now 12 months down the line?

Higher interest rates

Interest rates were just 2.25 per cent at the time of the Mini Budget, whereas they now stand at 5.25 per cent.

However, it should be noted that interest rates were already on an upwards trajectory before the Mini Budget, as the Bank of England had been hiking rates since December 2021 in an effort to tackle rising inflation.

Inflation remains high

Inflation fell from 6.8 per cent in July to 6.7 per cent in August, a drop that surprised many analysts, and good news for the government after it made halving inflation one of its priorities at the start of 2023.

But a fall in inflation doesn’t mean that prices are dropping, so the cost of living crisis that many were experiencing a year ago is getting worse, not better.

A year on from the Mini Budget, inflation remains stubbornly high, and still well above the Bank of England’s target of two per cent.

According to forecasts from the Organisation for Economic Co-operation and Development, inflation will average at 7.2 per cent in the UK this year. This would mean that prices are rising faster in the UK than in France, Germany, Italy, Japan, Canada and the US in 2023.

Mortgage rates are still high

On the day of the Mini Budget, the average rate for a two-year fix was 4.74 per cent. A month later, it was 6.65 per cent. But as interest rates have soared over the last few months, mortgage rates have gone up too.

According to Moneyfacts, the average rate on a two-year fixed mortgage hit 6.66 per cent in July 2023 – above the peak we saw amid the market volatility last autumn, and the highest level in 15 years.

Speaking to the Financial Times, Rachel Springall of Moneyfacts pointed out that while competitive deals can still be found, higher mortgage rates are having a big impact on consumers.

“Borrowers concerned over affordability of a deal might pause their home ownership plans, or indeed park the idea of refinancing,” she said.

Sluggish economic growth

Liz Truss’s big buzzword was “growth” – as she won the Conservative leadership after arguing that the economic policies of previous governments had not delivered growth over the previous 20 years.

She even branded the perceived critics of her economic approach, which included everyone from opposition parties and trade unions to environmental campaigners and “Brexit deniers”, as the “anti-growth coalition”.

But the economy has struggled to pick up even since her departure from No. 10.

According to the Office for National Statistics, gross domestic product slumped by 0.5 per cent in July 2023 – more than many analysts had been expecting.

While the UK has so far managed to avoid slipping into recession, the weak growth figures will remain a concern for the current prime minister and chancellor, particularly as the general election moves ever closer.

Fewer mortgage products available

Lenders took many mortgage products off the market in the days following the Mini Budget, and while the situation has improved, the number of options available is still lower than it was this time last year, clearly demonstrating how lenders have become increasingly cautious.

Falling house prices

According to figures from Halifax, average house prices fell by 4.6 per cent in the year to the end of August 2023. This means the price of a typical property has fallen by £14,000 in the last year.

On the face of it, this might look like good news for first-time buyers in particular, many of whom have struggled to get on the property ladder because of prohibitively high house prices.

But this decline is taking place against a backdrop of high inflation, soaring interest rates and elevated mortgage costs, so it remains as difficult as ever for many people to put together a deposit and find a mortgage they can afford.

Mortgage arrears rising

The value of mortgage arrears went up by 13 per cent between April and June 2023, and was 28.8 per cent greater than it had been a year earlier.

This translates to an outstanding mortgage debt at a seven-year high of £16.9 billion – a reflection of how many people are struggling with higher mortgage costs following the Mini Budget.

In some ways, the Mini Budget feels like a very long time ago.

But a year on, its impact is still being felt by many and having an effect on what financial decisions they’re able to make.

That’s why it’s so important to get advice from a regulated professional, so you can feel confident you’re taking the right steps for you and your family.

If you have any questions about managing your finances, please get in touch and we’ll be happy to speak with you.

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The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK. Welby is a trading name of Welby Associates Wealth Management Ltd Company Registered Number NI630504 who is authorised and regulated by the Financial Conduct Authority, FCA register number 697372. The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren't able to resolve themselves. To contact the Financial Ombudsman Service please visit

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