2-year fixed rate hits 6.66%, highest since 2008
Residential properties are pictured in an aerial view on June 26, 2023 in Enfield, England. According to data from the Financial Conduct Authority, borrowers in the London Borough of Enfield have the biggest mortgages relative to their income in the U.K.
A key U.K. mortgage rate on Tuesday climbed to its highest level for 15 years, surpassing levels reached in the aftermath of September's "mini-budget" crisis and deepening fears of a catastrophe for struggling homeowners.
The average rate of a two-year fixed deal now stands at 6.66%, according to figures from data provider Moneyfacts, a modest increase from Monday. It means mortgage costs are now at their highest level since August 2008 during the global financial crisis.
The 2-year rate hit 6.65% on Oct. 20 last year, shortly after former Finance Minister Kwasi Kwarteng's package of unfunded tax cuts sparked chaos in the mortgage market and threatened to topple pension funds.
The average 5-year mortgage rate rose to 6.17% on Tuesday, Moneyfacts said, a marginal increase from Monday but still some way off the 6.51% level reached on Oct. 20.
U.K. mortgage costs, which had staged a recovery in the months following the "mini-budget" crisis, have soared recently following 13 consecutive rate hikes by the Bank of England.
Most recently, the central bank increased rates by 50 basis points to 5%, a bigger increase than many had expected. The surprise move will affect millions of homeowners as the interest rates on many mortgages in the U.K. are directly linked to the central bank's base rate.
Renters, too, are likely to see their payments increase as buy-to-let landlords pass on higher mortgage repayments.
It comes as the Bank of England battles stubbornly high inflation, with Governor Andrew Bailey reportedly saying on Monday that the central must "see the job through" on bringing down prices.
Many believe further interest rate hikes are inevitable in the coming months.
Source: CNBC
