The average five-year fixed-rate mortgage has exceeded 6 per cent, according to new data.
Financial information website Moneyfacts revealed that on Tuesday, the typical rate on the market reached 6.01 per cent up from the previous day's average rate of 5.97 per cent. It's the highest rate that homeowners and would-be buyers have faced since November last year, during the tumult which followed former PM Liz Truss handling of the economy.
The last time these five-year fixed-rate mortgages surpassed 6% was in the wake of "mini-budget" announcement by former Chancellor Kwasi Kwarteng last year, where rates experienced a sharp rise. Similarly, the average two-year fixed residential mortgage deal climbed to 6.47 per cent on Tuesday, up from the previous day's 6.4 per cent, approaching the highs seen in October of the previous year during a period of market volatility.
Although mortgage rates have since stabilized, earlier in June, the average two-year fixed-rate surpassed 6% once again, marking the first occurrence in 2023. The soaring rates come after the Bank of England's decision to increase the UK base interest rate to 5 per cent, a more significant hike than many economists had anticipated. The central bank's move to raise rates for the thirteenth consecutive time was aimed at curbing rising inflation across the UK.
Experts predict that rates have yet to reach their peak and foresee a prolonged period of pricier mortgages, which will impact both existing and future homeowners, further exacerbating the downturn in the housing market. Figures from UK Finance indicate that approximately 2.4 million households will see their fixed-rate deals expire between now and the end of 2024.
Simultaneously, the average standard variable rate, which mortgage holders are typically transferred to after their deal expires, currently stands at 7.67% as of July 1. Sarah Olney, the Liberal Democrat MP and Treasury spokeswoman, said: “This is yet more mortgage misery for homeowners on the brink.
“Rishi Sunak asking homeowners to hold their nerve is sounding more tin-eared by the day.
“It shows this Conservative Government is just totally out of touch.
“Conservative ministers sent mortgages spiralling through all their chaos and incompetence, now they are refusing to lift a finger to help.”
Last month, Chancellor Jeremy Hunt unveiled a new mortgage charter, developed in collaboration with major lenders representing approximately 85% of the mortgage market.
Under the terms of the charter, banks will offer customers who are up to date with their payments the option to switch to interest-only payments for six months or extend their mortgage term to reduce monthly payments. Borrowers will have the ability to revert to their original term within six months by contacting their lender. Additionally, the charter prevents lenders from repossessing homes within a year of a borrower's first missed payment unless there are exceptional circumstances.
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