Homeowners are facing even more mortgage pain, as data released on Monday showed the average interest rate on a two-year fixed rate deal is now more than six per cent.
Those higher rates will come without fresh government support, as the Prime Minister said there will not be extra help for people struggling to make payments.
According to new data from Moneyfacts, the rate for a two-year fix surged from 5.98 per cent on Friday to 6.01 per cent on Monday morning.
It is the highest rate since the aftermath of Kwasi Kwarteng’s disastrous mini-Budget last autumn, when rates skyrocketed to peak at 6.65 per cent.
Five-year rates were also up from 5.62 per cent to 5.67 per cent.
Buy-to-let rates rose even faster, with two-year rates up from 6.21 per cent to 6.3 per cent and five-year rates up from 6.17 per cent to 6.23 per cent, 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. The latest inflation figures are out on Wednesday.
Homeowners had hoped to see government support to deal with their higher payments, but Rishi Sunak ruled out additional help.
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, Mr 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.
Rates could keep rising as 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 through the year, with markets pricing in an almost 50 per cent chance they hit six per cent in early 2024.
With most mortgage-holders still on fixed-rate deals agreed at a time of lower rates, experts expect a “mortgage time bomb” as fixed deals expire and homeowners are forced to agree new deals at higher prices.
Riz Malik at R3 Mortgages said: “We urgently need a cross-party Mortgage Task Force to find potential solutions to this ticking time bomb.
“This should be comprised of economists, lenders and other stakeholders who are actively involved in the mortgage market. We need action or the impending financial earthquake is going to send shockwaves across the country.”
