The average two-year fixed mortgage rate has hit 6.6 per cent, the highest it has been in 15 years and exceeding its peak after Liz Truss’ 2022 "mini" Budget.
According to Moneyfacts, the average two-year fixed rate rose to 6.66 per cent, meaning homeowners with a £200,000 loan over 25 years, whose deals are coming to an end, could face monthly bills which are £400 higher.
The lowest rates on the market currently stand at 5.64 per cent.
Rachel Springall, finance expert at Moneyfacts put the increase down to volatile swap rates, much of which is driven by high inflation.
She said: “Rising rates may well worry borrowers who are coming off fixed rate deals, such as those who locked into a rate below 3 per cent two years ago.”
Springall said on a first of month basis, the last time they were higher was August 2008 when the average two year fix was 6.94 per cent.
Brokers have laid the blame for soaring rates at the government and the Bank of England.
Founder of R3 Mortgages, Riz Malik, said: “666 is the number of the devil, and with average 2-year fixed rates hitting 6.66 per cent, many homeowners will be in a personal hell. The government and the Bank of England are equally to blame for this current mess.”
While Graham Cox, founder of SelfEmployedMortgageHub.com, said house prices could crash if rates remain this high for the rest of the year.
He said: "Homeowners, faced with a huge spike in borrowing costs when they come to remortgage, will have no option but to sell up. When everyone is trying to jump ship at the same time, it can only lead to one thing: slashed house prices.”
Inflation currently stands at 8.7 per cent and in a speech yesterday (July 10), the governor of the Bank of England, Andrew Bailey, called consumer price inflation “unacceptably high’ adding it must be brought down to the 2 per cent target.
He said: “Looking ahead, UK headline inflation is set to fall markedly over the remainder of the year. This largely owes to lower energy prices as last year’s substantial increases drop out of the annual calculation. Food prices should fall too as lower commodity prices feed through to prices in the shops.
“However, while the level of economic activity has failed to grow beyond its pre-pandemic level on a sustained basis, the UK economy has shown unexpected resilience in other ways in the face of these substantial – in some cases unprecedented – external shocks.”
tara.o'connor@ft.com
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