New two-year fixed mortgage rates near 6% in mini-Budget fallout

Mortgage rates have risen nearly a whole percentage point in the ten days since the mini-budget, today’s figures show.

Brokers warned homeowners will face a second week of chaos as lenders try to get a handle on market expectations of rising interest rates.

The typical cost of a two-year fixed home loan rose to 5.75 percent, from 4.74 percent on Sept. 23, the day of Chancellor Kwasi Kwarteng’s announcement.

This is more than double the average rate of 2.34 percent offered in December last year, according to Moneyfacts analysts.

Meanwhile, the price of a five-year fixed-rate mortgage contract shot up to 5.48 percent today, from an average of 4.75 percent on the day of the mini-Budget.

You can check what fixed rate mortgage deals can be offered to you and how much they would cost based on your mortgage size, home value and how long you want to fix with This is Money’s best mortgage interest calculator, powered by L&C.

Panic struck the property market last week amid concerns that the Bank of England would raise its key interest rate to 6 percent next year.

Lenders pulled nearly 2,000 mortgage products last week as they scrambled to reprice their deals to reflect future interest rate hikes.

Some, including Virgin Money and HSBC, made a cautious return to the market late last week, but at high rates.

NatWest announced on Sunday that it would increase its fixed-income deals by up to 1.78 percentage points.

According to data from the Bank of England, more than two million homeowners with fixed-term loans will refinance their mortgage between now and the end of 2024. They will have to pay thousands more if budgets are already compromised.

Yesterday, the chancellor announced he was reversing his most controversial policy by cutting the 45p income tax rate.

Brokers have reportedly answered questions from customers asking if they could withdraw mortgage applications filed in the past week.

Experts said borrowers falsely hoped the chancellor’s turnaround could prompt lenders to cut their rates in the coming weeks.

Dominik Lipnicki of Your Mortgage Solutions said: “The chancellor’s decision yesterday was a political decision that will have little effect on the city. People are still very stressed and panicked because they are beginning to understand that they are facing a huge shock in their mortgage bills, which is inevitable at this point.”

The rate hike is likely to put a brake on real estate sales, said Dominic Agace, chief executive of the Winkworth brokerage firm. “That happens every time mortgage rates go up,” he told the Financial Times.

He added that the slowdown would be greater in areas of the market where sales peaked during the pandemic, such as large country houses.

On the first day of last month, 3,890 mortgage products were for sale. That dropped to about 2,000 and yesterday the figure stood at 2,262.

Rachel Springall, a financial expert at Moneyfacts, said: “Borrowers may be concerned about a further decline in mortgage availability, but many lenders have made it very clear that their withdrawals are temporary amid uncertainty over interest rates.

“It would be wise to seek advice from an independent broker, especially for those borrowers who have not yet started the mortgage process and are put off by the level of choice and much higher mortgage rates than they might have anticipated.

“The next few weeks will be crucial to see where lenders are going from, but we’ve already seen some new solid deals come in since last week.”