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Mortgage rates soar to highest level for 15 years with average two-year fixed deal hitting 6.66%
11 July 2023, 09:10 | Updated: 11 July 2023, 09:27
The average interest rate for a two year fixed mortgage deal has hit 6.66%, the highest level in 15 years.
According to data from Moneyfacts, the rate has hit a new high - up from 6.63% yesterday.
Rates have been climbing steadily for weeks as the Bank of England battles to keep inflation under control.
The average five-year rate also rose, to 6.17%. Rates hit 6.51% last year, after Kwasi Kwarteng’s disastrous mini-budget “fiscal event”.
In further signs of the pressures on inflation, new figures showed that wages have increased at a record rate.
The Office for National Statistics (ONS) revealed on Tuesday that average regular pay, not including bonuses, was 7.3% higher in the three months to May compared with the same period last year.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said lenders made various rate rises across the mortgage market last week and withdrew some deals.
She said: "The outlook for mortgage rates appears to be leaning to more rate rises, particularly as swap rates (which lenders use to price their mortgages) remain volatile.
"Rising rates may well worry borrowers who are coming off fixed-rate deals, such as those who locked into a rate below 3% two years ago.
"It is still vital for borrowers to seek advice on what moves to make, but if they have some time left on their low-rate fixed mortgage, it's wise to consider increasing their repayments to reduce the term of their deal."
Borrowers considering making mortgage overpayments should carefully weigh up the benefits and potential drawbacks, as individual circumstances will vary.
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.
Chancellor Jeremy Hunt recently held a summit with mortgage lenders and a new mortgage charter was agreed to support those who are struggling.
Lenders will be able to offer borrowers a switch to interest-only payments for six months, and an extension to their mortgage term to reduce their monthly payments, with the option to switch back within six months.
Both options can now be offered without an affordability check.
A borrower will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment.
The Financial Conduct Authority (FCA) has moved quickly to make rulebook changes.
Sheldon Mills, executive director for consumers and competition at the FCA, has urged homeowners who are struggling with their mortgage, or believe they might have difficulties, to speak to their lender.
Mr Mills recently said: "If you can keep up with your mortgage payments, you should, as changing your contract could lead to higher payments down the line.
"But if you are worried about making your payments, contact your lender as soon as possible as they have a range of options to help.
"Regulation cannot stop rates from rising, but the wider measures we've put in place over the past decade will make sure people get the support they need, when they need it."
A new consumer duty, which takes effect at the end of July, will also compel lenders to offer support that meets a customer's individual needs, communicate clearly with people about their options and provide decent customer service.