THE average mortgage rate for a two-year fixed deal has risen to 6.01% - a figure that has not been seen since the market reeled from Liz Truss’s disastrous mini-Budget.
It comes as the Treasury ruled out any public money to help homeowners with Jeremy Hunt rejecting calls for direct state intervention.
More than 400,000 people will see their existing fixed deals end between July and September, meaning they could face significant rises to their monthly bills.
The UK inflation rate in April 2023 was more than 8% and this can have an impact on the price of people’s mortgages.
Why are mortgage rates so high?
Part of the reason for higher mortgage rates is because inflation is too high, which the Bank of England say raising interest rates can help solve.
However, if you're a borrower, the interest rate is the amount you are charged for borrowing money – a percentage of the total amount of the loan.
Rising interest rates can mean people see their monthly payments increase depending on the kind of mortage they're on.
For example, once a fixed-term mortgage comes to an end, you'll be moved to your lender's standard variable rate - if this has risen then monthly payments will likely rise as well.
According to the Bank of England’s website, higher interest rates make it more expensive for people to borrow money, making them more likely to save and spend less.
The website explains: “If people spend less on goods and services overall, the prices of those things tend to rise more slowly.”
However, economic experts have disputed whether or not this policy works including National columnist Richard Murphy.
Writing back in November, he expressed his "horror" as interest rates continued to rise.
In a separate piece for the Daily Mirror, he explained that he thought rising interest rates could plunge people into poverty because they would be unable to pay their borrowing costs.
The next interest rate announcement will come on June 22.
How is the rate of inflation measured?
To come up with an inflation figure, the Office for National Statistics (ONS) keeps track of the prices of hundreds of everyday items.
This is done through an imaginary "basket of goods" which is constantly updated to keep up with shopping trends.
For example, it was announced on Tuesday that supermarket inflation had eased to its lowest level this year although it still remains high at 16.5% in the four weeks to June 11, down from 17.2% last month.
When will mortgage rates come down?
Mortgage rates are set to remain high until inflation beings to fall, so that could mean that the rates continue on an upward trajectory.
The Prime Minister has said his goal is to halve inflation by the end of the year,
Property expert Matt Smith told The Big Issue: “Looking ahead, if the Bank of England outlines a positive view on the prospect for inflation and base rates, we could see mortgage rates fall, as they have done after recent base rate decisions.
“But if the bank is more cautious, we can expect rates to continue their upward trend in the short term.”
The next decision on interest rates is due to be announced on June 22 2023.
When will inflation go down?
It’s worth noting that lower inflation does not mean that prices fall, it just means they don’t rise so quickly.
The Bank of England has predicted that inflation will drop to 5% by the end of 2023, rather than the 4% it had originally anticipated.
