Homeowners are set to face even more mortgage pain, as the average interest rate on a two-year fixed-rate deal broke the 6% barrier.
Those higher rates will come without fresh government support, as Rishi Sunak this morning said there won’t be extra help for people struggling to make payments.
According to new data from Moneyfacts, the rate for a two-year fix increased from 5.98% to 6.01% on Friday. That’s the highest rate since the aftermath of Kwasi Kwarteng’s disastrous mini-Budget last Autumn, when rates skyrocketed to peak at 6.65%.
Five-year rates were also up from 5.62% to 5.67%. Buy-to-let rates rose even faster, with two-year rates up from 6.21% to 6.3% and five-year rates up from 6.17% to 6.23%, meaning renters and landlords will likely pay more too.
The latest price rises followed a surge in gilt yields — the return on government debt which lenders use to price their mortgage offerings — after inflation proved ‘stickier’ than expected in April and wage growth accelerated.
That prompted all major lenders to reprice their mortgage products, with some doing so twice.
Homeowners had hoped to see fresh government support to deal with their higher payments, but Rishi Sunak ruled out additional help today.
Levelling Up Secretary Michael Gove suggested the Government was considering fresh help, saying he was “concerned” by events in the mortgage market.
Mr Gove told Sky News’s Sophy Ridge On Sunday show: “When it comes to mortgages, it’s the independent Bank of England’s interest rate decisions that will govern that, but we are looking at everything that we can do in order to help homeowners through this difficult period.”
But speaking on ITV’s Good Morning Britain, Sunak said the Government needs to “stick to the plan” rather than offer new help.
He said: “I know the anxiety people will have about the mortgage rates, that is why the first priority I set out at the beginning of the year was to halve inflation because that is the best and most important way that we can keep costs and interest rates down for people.”
Even higher rates could be on the way, as another 240 mortgage products were taken off the market on Friday.
The Bank of England will announce its latest interest rate decision on Thursday, with a 13th consecutive rise all but certain. The Bank is expected to keep hiking rates this year, with markets pricing in a 50% chance that rates hit 6% in early 2024.
With most mortgage-holders still on fixed-rate deals agreed at a time of lower interest rates, experts expect a ‘mortgage time bomb’, as fixed deals expire and homeowners are forced to agree new deals with higher rates.
