The governor of the Bank of England has told MPs there is still “something of a hangover effect” in the wake of the mini-budget market chaos last year but declared that the hit to mortgages was over.

Andrew Bailey used remarks to the Treasury committee to declare that market conditions had returned to normal after the economic competence of the-then Liz Truss government was called into question – sparking chaos in the bond markets and forcing up borrowing costs.

The damage caused by the so called growth plan, outlined by her short-lived chancellor Kwasi Kwarteng last September, had now been largely eradicated, according to Mr Bailey.

He said: “I hoped that we would see mortgage rates come down, and that has happened, we have seen new fixed-rate mortgage rates have come down since.

“I’m talking there about the lower-risk end of the mortgage market, so loans with a sub-75% loan-to-value, and actually the higher-risk end as well.

“We have seen correcting in that respect and, of course, that benefits people seeking mortgages.”

While the crisis may be over, data from financial information service moneyfacts.co.uk suggested that fixed rate mortgage costs were still above were they were ahead of the mini-budget.

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Its figures showed that the average two-year fixed rate stood at 5.6% on Monday.

The five-year figure stood slightly above 5.4%.

Both of them had stood above 4% in the weeks before the Truss government’s giveaway but the key reason for the disparity is the Bank’s action to tackle inflation since the mini-budget through hikes to Bank rate.

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The current availability of mortgage deals is consistent with the number at the beginning of September last year at close to 3,800.

Mr Bailey added that the “risk premium” in the UK interest rate environment had now gone – meaning the higher rates demanded in countries where there is greater economic instability – but added that the “hangover” element was down to trust.

“It is going to take some time to convince people that we are back to where we were before,” he said.

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