Two-year fixed mortgage rates exceed 6% as home loans reach their highest rates since 2008

The average two-year fixed rate mortgage was 6.07 percent, the highest interest level in 14 years.

Five-year fixed rates have also increased with interest now averaging 5.97 percent, according to analysts at Moneyfacts.

It is part of the fallout from the Chancellor’s mini-budget less than two weeks ago, which sparked new uncertainty in the UK economy by announcing a series of tax cuts – some of which have since been reversed.

The two-year average fixed rate has increased by 1.33 percent in the 13 days since then, while the five-year average fixed rate has increased by 1.22 percent.

Monetarily speaking, the impact on borrowers seeking a new mortgage is severe. For a £200,000 mortgage, the cost of borrowing on a new two-year fixed deal has increased by £158 a month, or £1,896 a year, in less than two weeks.

The rise is sharper compared to December last year, before the Bank of England started raising the key interest rate.

On December 1, the two-year repair rate was just 2.34 percent. At this rate, a £200,000 mortgage would only cost £881 a month, but today it would cost £1,297.

Mortgage rates have risen steadily since December when the Bank of England started raising its base rate from 0.1 per cent in a bid to tackle rising inflation. After consecutive hikes, it is now at 2.25 percent.

The pace of the mortgage rate hike accelerated over the summer as the central bank continued its course. On Sept. 1, the average two-year fixed rate was 4.24 percent, and the five-year fixed rate was 4.33 percent, according to Moneyfacts.

By the end of the month (September 30), this percentage had increased to 5.17 percent and 5.10 percent, respectively.

This means that someone who took out a two-year fixed-term mortgage at the end of September would, on average, pay an extra £107 a month, or an extra £1,285 a year, on a £200,000 mortgage than someone who took On a mortgage initially.

Rachel Springol, financial expert at MoneyFacts, said: “Borrowers may be concerned about rising fixed-rate mortgages, but it is essential that they seek advice to evaluate the deals available to them at the moment.

The decline in product availability could be concerning but many lenders have been vocal in stressing that their withdrawals are temporary amid uncertainty about interest rates.

A longer term fix would seem more attractive, especially as both the two-year and five-year average flat rates are rising to levels not seen in over a decade. Consumers need to think carefully about whether now is a good time to buy a home or wait and see how things change in the coming weeks.

Homeowners can check what rates they can get for their mortgage size and home value over different fixed rate periods using Money’s best mortgage rates calculator.

“The lack of products available while mortgage providers assess the debt market combined with expectations of higher interest rates are the two main factors driving the average two-year mortgage rate over six in the region,” said Joshua Raymond, director at brokerage XTB. Cent.

What we’ll likely see is borrowers moving into longer-term deals, but we expect those rates to also see upward pressure, so borrowers will likely face higher mortgage costs regardless of whether they renew into short-term or long-term deals.

Others point out that although the government has cut stamp duty in its mini-budget, the higher cost of borrowing will dampen home-buying demand.

James Miles, director and mortgage advisor at brokerage firm The Mortgage Quarter, added: ‘Three clients of this have decided not to move to their next home because they are worried it will put more pressure on their family’s expenses.

This will certainly reduce demand and lower housing prices. There are very few winners in these uncertain times. Obviously rates need to be controlled and some leadership shown from government as payments become unaffordable.