More misery for homeowners as average rate for a five-year fixed mortgage reaches 6%
4 July 2023, 10:36
The average five-year fixed-rate mortgage rate has risen to 6.01%, according to a financial information company, piling more misery on people looking to buy a house or renew their deals.
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The average two-year fixed rate mortgage has increased to 6.47%, Moneyfacts said.
On Monday, the previous average for a five-year mortgage was 5.97%, while the two-year deal was 6.42%.
Five-year fixes are at the highest rate since November 2022, when Liz Truss' mini-budget sent markets into a frenzy.
It comes as the Bank of England raised interest rates yet again to 5% in June, the 13th straight hike - taking the base rate to its highest level in 15 years.
The Bank said higher inflation, especially services inflation, meant it had to act faster to bring prices under control.
Read more: Changes to mortgages announced to help households struggling with soaring interest rates
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Inflation didn’t change in May, remaining at 8.7% despite supermarkets boasting of price cuts for certain products.
Mortgages can be fixed-rate, meaning the borrower has to pay a set amount every month over the course of the two or five years, or they can be on a tracker - meaning the amount usually goes up and down with the Bank of England's base rate.
Most homeowners in the UK are on fixed-rate mortgages. 2.4 million of those deals will run out before the end of 2024, according to UK Finance, the banking industry trade body.
A series of measures were announced last week to help people cope with mortgage repayments.
Caller brands government intervention on mortgage hikes 'spoonfeeding'
Banks met the Chancellor and agreed there will be a minimum 12 month period before a home is repossessed.
Read more: Speak to your lender: Minister’s message to Brits struggling with mortgages as he says inflation will come downRead more: Changes to mortgages announced to help households struggling with soaring interest rates
Borrowers will also be able to make a temporary change to their mortgage terms, for example by switching to an interest-only deal, then will be able to return to their original deal within six months without impacting their credit scores.
Chancellor Jeremy Hunt hailed the "important" agreements with banks and lenders."There are two groups of people that we are particularly worried about.
The first are people who are at real risk of losing their homes because they fall behind in their mortgage payments," he said.
"The second are people who are having to change their mortgage because their fixed rate comes to an end, and they're worried about the impact on their family finances of higher mortgage rates."
The three measures:
- Speaking to your bank if you are struggling has no impact on credit score
- Change to interest only or extend mortgage term - for six months no questions asked
- Minimum 12-month period before repossessions can occur
