UK mortgage costs break mini-budget highs

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The cost of two-year fixed rate mortgages in the UK has surpassed the highs reached after last autumn's 'mini' budget, as lenders raise prices in response to rising interest rates. Lenders have responded to rising interest rates and expectations of further tightening by raising the cost of borrowing, with the average rate on a two-year fixed mortgage hitting 6.66 percent on Tuesday, according to mortgage provider Moneyfacts data. That is the highest level since 2008. Two-year fixed-rate mortgages previously peaked at 6.65 per cent on October 20 last year, after unfunded tax cuts in then-prime minister Liz Truss' “mini” budget triggered a intense volatility in the market.

The latest spike will put further pressure on thousands of homeowners and potential buyers already pressured by the higher cost of living. Rachel Springall, finance expert at Moneyfacts, said that while consumers Job Function Email Database can still find some competitive deals, "borrowers concerned about the affordability of a deal could put their home ownership plans on hold or actually shelve the idea of ​​refinancing." ». The rise in borrowing costs comes on the same day MPs on the House of Commons Treasury select committee are due to quiz mortgage lenders on consumer behavior following recent rate rises, affordability and availability. of mortgages and the impact on housing prices. High mortgage rates helped UK house prices fall last month at the fastest annual rate since 2011, according to Halifax data.



The average property price decreased by 2.6 percent in June compared to the same month in 2022, and was more than double the 1.1 percent drop in May. Although repossessions remain at historically low levels, last month the government reached an agreement with British banks to wait at least 12 months before repossessing the homes of borrowers who fall behind on payments because the cost of repayments reduces family budgets. The agreement also included a commitment to allow borrowers to temporarily extend mortgage terms without affecting their credit ratings. The Bank of England raised interest rates to a 15-year high of 5 percent last month, and investors predict they will hit 6.5 percent next March, the highest level since.