Mortgage Rates Hit 15-Year High: A Personal Hell for Homeowners

Mortgage rates have reached a 15-year high, sparking fears of a "mortgage time bomb" for homeowners. With rates expected to continue rising, what does this mean for the future of the housing market?

Mortgage Rates Hit 15-Year High: A Personal Hell for Homeowners

The average two-year mortgage rate has reached a staggering 15-year high of 6.66%, surpassing the peak hit in the wake of last year’s mini-budget. This drastic increase has sparked fears of a “mortgage time bomb” as homeowners who agreed to fixed-rate deals in a time of low interest rates are set to come off their fixes and will be forced to sign up for new deals with much heftier interest payments.

The average two-year mortgage rate has reached a 15-year high of 6.66%

According to data from Moneyfacts, the average interest rate on a two-year deal is up from 6.63% yesterday. Rates have been steadily climbing for the past six weeks on the back of stickier-than-expected inflation, which led to new fears that the Bank of England will raise interest rates higher and keep them there for longer.

“£666 is the number of the devil, and with average 2-year fixed rates hitting 6.66%, many homeowners will be in a personal hell.” - Riz Malik, director of mortgage broker R3 Mortgages

The City currently sees interest rates peaking at 6.25% or 6.5% early next year, though some commentators have warned of the potential of 7% Bank rates, which could mean mortgage rates above 8%.

Riz Malik, director of mortgage broker R3 Mortgages

The average five-year rate also rose, to 6.17%. They hit 6.51% last year, soon after Kwasi Kwarteng’s disastrous “fiscal event”.

More rises are likely to be on the way, as almost 300 lenders withdrew their products from the market in the past day. The number of products on offer is the lowest since March.

All of the UK’s top lenders, such as Halifax, Nationwide, and HSBC, have repeatedly withdrawn and repriced their mortgages in recent weeks.

UK’s top lenders have repeatedly withdrawn and repriced their mortgages

According to Bank of England data, the average interest rate paid by mortgage holders in May was just 2.84%. Today, stronger-than-expected wage growth added to interest rate fears.