Average UK mortgage rates at highest for 14 years

Average mortgage rates in the UK have leapt up with the two-year fixed rate at its highest for 14 years, according to data service Moneyfacts. 

Yesterday the average mortgage rate for a two-year fixed product was 6.07% - the last time the average two-year fixed rate mortgage was 6% or more was in November 2008 at 6.31%. The rate was up from 5.97% on Tuesday, and compares with an average rate of 4.74% on September 23 meaning the average rate has risen 1.33% since chancellor Kwasi Kwarteng’s mini budget. 

For five-year fixed rate mortgages the average rate was 5.97% yesterday - nearly 6%, up from 5.75% the day before. The last time five-year fixed rates were 6% or more was in February 2010 at 6.00%. As recently as December last year, average interest rates for two year fixed rate mortgages were as low as 2.34% and for five year mortgages just 2.64%.

Higher Bank of England interest rates are expected after the government’s ‘mini’ budget on the 23 September, which saw the share prices of Britain’s largest housebuilders fall on the day by around 5% to 6%. 

Shares in most major listed housebuilders are now down between 10-15% on where they stood prior to the mini-budget, given fears over the impact of likely higher interest rates on demand for new homes.

Rachel Springall, finance expert at Moneyfacts, said: “Consumers must carefully consider whether now is the right time to buy a home or to wait and see how things change in the coming weeks.”

She urged borrowers to “seek advice to assess the deals that are available to them right now”. She added: “Fixing for longer may seem more appealing, particularly as both the average two and five year fixed rates rise to levels not seen in over a decade.” 

Moneyfacts also revealed at the end of last month a third of all mortgage products had now been withdrawn by lenders since the government’s “mini budget” announcement. As of yesterday, the number of mortgages available to prospective buyers was almost exactly 40% down on the levelt seen prior to September 23.

Springall also said: “The drop in product availability may be worrying but many lenders have been vocal to stress their withdrawals are temporary amid interest rate uncertainties.”