Two-year mortgage rates hit 15-year high of 6.66%

The average two-year mortgage rates hit a 15-year high of 6.66% today, surpassing the peak hit in the wake of last year’s mini-budget.

The average interest rate on a two-year deal is up from 6.63% yesterday, according to data from Moneyfacts.

Rates have been steadily climbing for the past six weeks on the back of stickier-than-expected inflation, which led to new fears that the Bank of England will raise interest rates higher and keep them there for longer. The City currently sees interests peaking at 6.25% or 6.5% early next year, though some commentators have warned of the potential of 7% Bank rates, which could mean mortgage rates above 8%.

Riz Malik, director of mortgage broker R3 Mortgages said: “666 is the number of the devil, and with average 2-year fixed rates hitting 6.66%, many homeowners will be in a personal hell. The government and the Bank of England are equally to blame for this current mess. As rates surpass the rule of Truss and Kwarteng it’s only fair that Sunak, Hunt, Bailey and the whole MPC suffer the same fate.”

The average five-year rate also rose, to 6.17%. They hit 6.51% last year, soon after Kwasi Kwarteng’s disastrous “fiscal event”.

More rises are likely to be on the way, as almost 300 lenders withdrew their products from the market in the past day. The number of products on offer is the lowest since March. All of the UK’s top lenders such as Halifax, Nationwide and HSBC have repeatedly withdrawn and repriced their mortgages in recent weeks.

The rocketing mortgage rates has led to fears of a “mortgage time bomb” as homeowners who agreed fixed-rate deals in a time of low interest rates are set to come off their fixes and will be forced to sign up for new deals with much heftier interest payments. According to Bank of England data, the average interest rate paid by mortgage holders in May was just 2.84%.

Today, stronger-than-expected wage growth added to interest rate fears.

Martin Beck, chief economic advisor to the EY ITEM Club, said: “The pressure on the MPC to continue increasing rates in August will be intense.”