Mortgage rates climb to 15-year high following surprisingly strong wage growth
The typical rate available on a two-year fixed mortgage has climbed to a 15-year high, surpassing the levels seen last Autumn in the wake of the disastrous mini-budget.
According to Moneyfacts, the average two-year fixed residential mortgage rate hit 6.66 per cent, marginally higher than the 6.65 per cent seen last October.
This was the highest rate since August 2008, when the average rate available was 6.94 per cent.
The average rate on a five-year fixed deal stood at 6.17 per cent, some way below the 6.51 per cent peak seen last October.
Haven fallen steadily since October, mortgage rates have spiralled in recent weeks as inflation has remained persistently higher than the Bank of England’s target, raising the likelihood of further interest rate rises.
Higher interest rates are designed to cool the economy by making borrowing more expensive.
Just this morning, official figures showed that workers’ pay is rising faster than expected at 7.3 per cent, making it the fastest pay increase since the ONS started reporting in 2001. This makes it all but certain the Bank will lift rates higher.
Markets now expect rates to peak at 6.5 per cent, with a 50 basis point hike likely at the Bank’s next Monetary Policy Committee meeting.
As rates have spiralled banks have been called on to do more to help borrowers. At the end of last month, the UK’s largest lenders came together to issue the Mortgage Charter, offering struggling borrowers a range of options to manage their mortgage payments.
The options include borrowers being able to switch to interest-only payments or extend the term of the mortgage without affordability checks.
Around 2.4 million fixed-rate mortgages are due to end between now and the end of 2024, according to figures from trade association UK Finance.