UK mortgage rates hit 15-year high after surpassing ‘mini-budget’ peak
A KEY British mortgage rate hit a 15-year high on Tuesday (Jul 11) when it rose above the levels reached in the aftermath of last year’s “mini-budget” crisis.
The average two-year fixed residential mortgage rate hit 6.66 per cent, narrowly exceeding the 6.65 per cent touched on Oct 20 and the highest since August 2008 when it stood at 6.94 per cent.
Britain’s housing market activity staged a recovery in early 2023 from the turmoil triggered by the unfunded tax-cutting plans of former prime minister Liz Truss. But homeowners and buyers have faced renewed mortgage pain in recent months.
Fixed mortgage deal rates have risen rapidly in recent weeks, as stickier-than-expected consumer price inflation (CPI), which held at 8.7 per cent in May, pushed up bond yields. The stubborn CPI also increased market bets on the Bank of England’s benchmark rate peaking at 6.5 per cent, up from 5 per cent now.
Swap rates, a key measure lenders use to determine the cost of mortgage borrowing, have also soared. Two-year swaps jumped by 0.89 percentage point over the course of June.
The surge has prompted major mortgage lenders to repeatedly reprice home loan offerings. However, most households have yet to face the impact of higher borrowing costs as they are still locked in to previous deals.
The five-year rate, which peaked last October at 6.51 per cent, rose to 6.17 per cent on Tuesday.
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