UK Mortgage Rates Hit Two-Year High as Inflation Bites

Mortgage rates in the UK have reached two-year highs as major lenders withdraw products priced below 5% amid growing economic pressures. The average two-year fixed mortgage has risen to its highest level since July, while the five-year home loan rate has reached its highest point since October 2023.

Barclays removed its 4.75% two-year fixed rate and 4.93% five-year deal for new customers this week, leaving its best rates above the 5% threshold. Nationwide, Virgin Money, and TSB have also announced rate increases.

The rising rates come as property market activity shows signs of weakening, with inflation currently running at 3.1%. Bank of England Governor Andrew Bailey has indicated that the Bank Rate may need to increase from its current 3.75% to address inflationary pressures.