Mortgage rate rises above 6% for the first time in six months
Today the Prime Minister announced his decision to decline extra support for mortgage holders despite rates surpassing 6% for the first time since December.
According to the financial information service Moneyfacts, the average rate for a two-year fixed mortgage currently stands at 6.01% and the average five-year fixed rate has increased to 5.67%.
As costs continue to soar, mortgage lenders have been hiking up rates and pulling deals at a rapid rate in recent weeks – the most recent example comes from the UK leading bank Santander, as they made the decision last week to pull mortgage deals for new borrows, amid a fresh warning that further interest rate increases may be needed to tackle inflation.
The current increase on the two-year fixed deal has reached a high that hasn’t been seen since 1st December 2022, when the market reeled from the Liz Truss government. But before then, the rate had not hit 6% since November 2008.
However, even though millions of people are struggling with the rising costs-of-living, when asked if he was going to provide any support to people that are going to be affected by the increase in mortgage rates, the UK Prime Minister, Rishi Sunak, refused, claiming the government need to keep their focus on bringing inflation rates down.
Mr Sunak said in a statement: ‘I know the anxiety people are going to have about mortgage rates. The first priority at the beginning of the year was to halve inflation – that’s 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 delivery. We need to stick to the plan.’
In a bid to defend the government, Mr Sunak has pointed to existing support available for people struggling with mortgage rates, including the mortgage guarantee scheme for first-time buyers, which offers lenders the option to purchase a guarantee on mortgages which compensates them for a portion of net losses suffered in the event of repossession.
In addition to highlighting the climb in two-year fixed mortgage rates, Moneyfacts figures also showed a drop in availability of mortgage products. A total of 4,683 mortgages are on the market, down from 4,923 on Friday. However, this is still more than the 3,890 on offer before the September mini budget of unfunded tax cuts and increased spending.
As a result of mortgage rates increasing, the former Bank of England deputy governor, Sir Charlie Bean, has warned against government intervention, stating it would be ‘risky’ for the government to protect mortgage holders against rising rates.
At the moment, the Bank of England interest rates are sat at 4.5%, but for the 14th time, they are due to rise again on Thursday.
Image: Scott Graham