Mortgage Pain Intensifies as Fixed Rates Reach New Heights

Fixed mortgage rates are climbing in anticipation of the Bank of England's base rate decision this week. According to Moneyfacts, the average two-year fixed homeowner mortgage rate is now at its highest level since May 28, sitting at 5.73%. The five-year fix has also risen to a new high, reaching 5.78% on Tuesday.

This surge in rates comes as some lenders have made mortgage rate hikes twice this month alone, amidst higher swap rates used to price mortgages. Rachel Springall from Moneyfactscompare.co.uk notes that 'a second wave of mortgage rate hikes has begun' due to growing concerns over inflationary pressures.

The choice of products available has also decreased, with 7,426 homeowner mortgage products on the market down from 5,458 on Monday. This reduced selection may lead to higher prices for borrowers who cannot yet lock into a new deal, particularly those with a five-year fixed rate that will not expire until 2027.

In contrast to the base rate, which is expected to remain unchanged at 3.75%, Springall emphasizes that 'fixed mortgage rates are not intrinsically linked to adjustments to the Bank of England base rate'. This means borrowers should be prepared for further rate increases in the months ahead.