Average mortgage rate rises above 6% for five-year fixed deals

Business

The average mortgage rate for a five-year fixed deal has risen to 6.01%, according to a financial information company.

Meanwhile, the average two-year fixed rate mortgage has increased to 6.47%, Moneyfacts said.

The previous average for a five-year rate was 5.97% on Monday, while the two-year deal was 6.42%.

A five-year fixed deal is at a high not seen since 21 November – as the market reeled from the botched mini budget under Liz Truss’s government.

Cost of living latest: ‘Snowballing’ driving up mortgage prices’

The average rate for a two-year fix went over 6% about two weeks ago.

The majority of mortgage holders are on fixed rate deals and more than 2.4 million fixed-rate deals will expire from now to the end of 2024, UK Finance, the banking industry trade body has said.

More on Interest Rates

Mortgage rates have been rising significantly since May when inflation data showed the rate of price rises was not coming down as quickly as expected.

That led markets to expect the Bank of England would raise the base rate interest rates higher than previously thought, in its efforts to bring inflation down to 2%. Lenders priced the expected rise in to the mortgages they have on the market, meaning people are being offered higher mortgage rates when their existing fixed rate mortgage ends.

The current Bank of England base interest rate was hiked to a shock 5% last month in the wake of the stubbornly high inflation data.

Another hike, bringing the rate to 5.5%, is forecast to come on 3 August, when the Bank of England’s Monetary Policy Committee meets.

The monetary policy maker has been progressively raising interest rates – making borrowing more expensive – to dampen economic activity and slow down the rate of price rises.

The consumer price index measure of inflation stood at 8.7% in the year up to May.

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