Average five-year mortgage rates hover at 6% post-Truss debacle
In a significant financial shift, mortgage rates have witnessed a substantial increase following the Liz Truss mini-budget that sent borrowing costs soaring. This rise has had a profound impact on the affordability of home ownership for many individuals.
The current base rate, as per the latest information, stands at 5%. However, the Bank of England is expected to increase this rate and keep it higher for longer due to the high inflation. Since an all-time low of 0.1% in December 2021, the base rate has risen 13 times. The most recent increase occurred between the start of May and the current date, raising the average rate from 4.97%.
As a result, the average five-year, fixed-rate mortgage has reached 6.01%, marking the first time it has surpassed 6% since November 2021. This is a significant financial change for homeowners with fixed-rate mortgages, especially those with mortgages nearing their end date.
Interestingly, five-year mortgage rates are still lower than two-year rates, with the latter averaging 6.47%. The peak of two-year fixed rates was reached on October 20, when they peaked at 6.65%.
The increase in mortgage rates may lead to a slowdown in the housing market due to reduced affordability. Homeowners are facing increased repayments, with the rise in the average rate adding £1,488 to annual repayments on a typical 25-year mortgage worth £200,000.
The expectations of future Bank of England rates, called swap rates, are used by banks and building societies to price fixed-rate mortgages. The consumer price inflation has surpassed expectations and remains at 8.7% as per the Office for National Statistics. This suggests that the increase in mortgage rates is a result of banks and building societies continuing to push up rates.
However, it's worth noting that as of the current date, there is no specific information available about the bank that exhibited the highest five-year fixed mortgage fees at a five-year contract term since November.
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