Average two-year fixed-rate mortgage tops 6% for first time in 2023

The last time that the average two-year fixed-rate mortgage was 6% or higher was in December 2022, according to figures from Moneyfactscompare.co.uk.

The average two-year fixed-rate homeowner mortgage on the market has topped 6% for the first time this year, according to Moneyfactscompare.co.uk (Joe Giddens/PA) (PA Archive)

The average two-year fixed-rate homeowner mortgage on the market has topped 6% for the first time this year.

The rise takes the rate back towards territory last seen during the market volatility that followed last autumn’s mini-budget.

Across all deposit sizes, the average two-year fixed rate edged up to 6.01% on Monday, Moneyfactscompare.co.uk said.

This rate was at 5.98% on Friday last week and hit 6% over the weekend.

The last time that the average two-year fixed-rate mortgage was 6% or higher was on December 4 2022, according to Moneyfacts’ figures.

Mortgage rates previously rocketed amid market turmoil after the mini-budget in September 2022. Average two and five-year fixed mortgage rates topped 6% last autumn, before later settling down.

We have the mortgage guarantee scheme for first-time buyers and we have the support for mortgage interest scheme which is there to help people as well

Prime Minister Rishi Sunak

By October 20 last year, the average five-year deal was 6.51% and a two-year product was 6.65% typically.

Moneyfacts’ figures also show the average five-year fixed-rate mortgage on the market is sitting at 5.67%, across all deposit sizes.

The choice of residential mortgages had fallen from 4,923 on Friday to 4,683 on Monday morning, the website said.

Mortgage rates have been rising amid expectations over inflation, which has been stickier than some had predicted. The Bank of England is expected to raise the base rate further on Thursday.

Some analysts expect the base rate to rise by another 0.25 percentage points on Thursday, taking the rate to 4.75%. This would immediately push up costs for people on variable rate tracker mortgages.

The Government is under pressure to fulfil its pledge to halve inflation by the end of the year. Consumer Prices Index (CPI) inflation eased back far less than expected in April, hitting 8.7%.

But the Bank of England is “caught between a rock and a hard place, as it has to choose between pushing more mortgage borrowers towards the brink and letting inflation run riot”, according to Laith Khalaf, head of investment analysis at AJ Bell.

Rises in wages and living costs have fuelled expectations that interest rates will remain higher for longer. Mortgage providers have been withdrawing the availability of deals through some channels to manage the flow of applications and refreshing their ranges with higher rates.

The latest inflation data will be published by the Office for National Statistics (ONS) on Wednesday.

Around 800,000 fixed-rate deals are due to end in the second half of this year, according to trade association UK Finance.

According to the Resolution Foundation think tank, annual mortgage repayments are set to rise by £2,900 for the average household remortgaging next year.

Speaking to ITV’s Good Morning Britain, Prime Minister Rishi Sunak said that halving inflation is a priority.

He said: “I know the anxiety people will have about the mortgage rates, that is why the first priority I set out at the beginning of the year was to halve inflation because that is the best and most important way that we can keep costs and interest rates down for people.

“We’ve got a clear plan to do that, it is delivering, we need to stick to the plan.

“But there is also support available for people. We have the mortgage guarantee scheme for first-time buyers and we have the support for mortgage interest scheme which is there to help people as well.

“But look, that is why my first priority is to halve inflation, one of my other priorities is to cut the waiting lists.”

Mortgage lenders are obliged to offer support to their customers, so those struggling to meet mortgage payments should speak to their lender about what help is available

Sam Richardson, Which? Money

Levelling Up Secretary Michael Gove told Sky News’s Sophy Ridge on Sunday show: “When it comes to mortgages, it’s the independent Bank of England’s interest rate decisions that will govern that, but we are looking at everything that we can do in order to help homeowners through this difficult period.”

Sam Richardson, deputy editor of Which? Money, said last week: “Mortgage lenders are obliged to offer support to their customers, so those struggling to meet mortgage payments should speak to their lender about what help is available.

“Doing so will not affect your credit rating. Further support may come in the form of a temporary break from payments, interest-only repayments or extending the term of the mortgage.

“If you’re entitled to benefits such as universal credit, you may be able to apply for the Government’s support for mortgage interest loan scheme.”