If you’ve been putting off remortgaging and hoping things might settle down, this week’s news won’t make for comfortable reading over your morning tea.
Average two-year fixed mortgage rates have climbed to their highest point since the early days of the UK-Iran conflict, according to figures from Moneyfacts. The typical two-year fix now sits above 6.2%, with five-year deals not far behind at around 5.9%. For someone remortgaging a £250,000 property, that could mean an extra £300 or more on the monthly bill compared to the deals available just two years ago.
The Bank of England’s base rate has remained stubbornly elevated as policymakers continue to wrestle with inflation that simply refuses to behave. Swap rates, which lenders use to price their fixed deals, have been creeping upward again in recent weeks, and the banks have wasted little time passing that pain along to borrowers.
“We’re seeing people come to us in genuine distress,” said one independent mortgage broker based in Manchester. “They locked in at 1.8% in 2022 and now they’re staring down the barrel of 6%-plus. That’s not an abstract number, that’s groceries, school trips, holidays, gone.”
First-time buyers are bearing the brunt of it. Affordability checks have become even more punishing, with some lenders stress-testing applicants at rates north of 8%. That’s pushing younger buyers further out of the market and deeper into the private rental sector, which, as anyone renting in London or Bristol will tell you, is hardly a soft landing.
There are a few lenders quietly trimming rates on select products, so it’s not entirely bleak. Smaller building societies in particular have been more nimble than the high street giants. But the broad trend remains upward, and the prospect of a meaningful Bank of England rate cut before the end of the year looks shakier than it did in January.
The question hanging over millions of UK households now is whether this is the new normal or simply the peak before the descent. The answer matters enormously, and right now, nobody in Threadneedle Street seems entirely sure either.
