Interest rates on a two-fixed mortgage have risen above 6% for the first time since Liz Truss’s mini-budget last September threw UK bond markets into chaos.
According to financial research group Moneyfacts, the average for a two-year fixed rate mortgage rose to 6.01% this morning, from 5.98% on Friday, while another 240 products were withdrawn pending repricing.
A five-year fixed loan taken out today would now cost 5.67% on average, said Moneyfacts.
Lenders are repricing ahead of what is likely to be another difficult week for the Bank of England, with inflation figures for May due from the ONS on Wednesday.
Economists expect a slight dip from last month’s 8.5% but not enough to ease the pressure on the Bank of England, which is expected to raise UK interest rates to 4.75% on Thursday.
This morning, prime minister Rishi Sunak told ITV that the government would not provide additional help for people facing large mortgage rate hikes,
Rather, the priority for the government remained to halve the rate of inflation by the end of the year.
Lenders reference gilt yields when pricing mortgages and the dilemma for the government is that many in the City believe that to achieve that target the Bank of England will have to raise base rates eventually to 6%.
Reflecting that two-year gilt yields hit a 15-year high at 4.97% this morning.