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

Rates on two-year fixed mortgages near 6% in fallout from mini-Budget as home loan costs jump and brokers warn of a second week of mayhem

  • Mortgage rates have risen by nearly a whole percentage point since mini-Budget
  • Brokers warned homeowners face further mayhem amid soaring interest rates
  • Lenders pulled nearly 2,000 mortgage products in a scramble to reprice deals

Mortgage rates have risen by nearly a whole percentage point in the ten days since the mini-Budget, figures showed today. 

Brokers warned that homeowners face a second week of mayhem as lenders try to get to grips with market expectations of soaring interest rates. 

The typical cost of a two-year fixed home loan has risen to 5.75 per cent, up from 4.74 per cent on September 23, the day of Chancellor Kwasi Kwarteng’s announcement. 

This is more than double the 2.34 per cent average rate on offer last December, according to analysts at Moneyfacts. 

Mortgage rates have risen by nearly a whole percentage point in the ten days since the mini-Budget, figures showed today

 Mortgage rates have risen by nearly a whole percentage point in the ten days since the mini-Budget, figures showed today

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

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

Panic swept the property market last week amid concerns the Bank of England would hike its base rate to 6 per cent next year. 

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

Some, including Virgin Money and HSBC, cautiously returned to the market at the end of last week – but with inflated rates. 

NatWest announced on Sunday that it was increasing its fixed-rate deals by up to 1.78 percentage points. 

According to Bank of England data, more than two million homeowners with fixed-term loans will remortgage between now and the end of 2024. They face paying thousands more when budgets have already been battered. 

Yesterday the Chancellor announced he was performing a U-turn on his most controversial policy, cutting the 45p rate of income tax. 

Brokers reportedly fielded inquiries from clients asking if they could pull mortgage applications submitted over the past week. 

Experts said borrowers were wrongly hoping that the Chancellor’s U-turn could spark lenders to lower their rates over the next few weeks. 

Dominik Lipnicki of Your Mortgage Solutions said: ‘The Chancellor’s decision yester – day was a political one which will have little effect on the City. People are still very much stressed and panicked as they are starting to understand they are facing a huge shock in their mortgage bills which is unavoidable at this point.’ 

The rate rise is likely to put the brakes on property sales, said Dominic Agace, chief executive of estate agency Winkworth. ‘It’s what happens every time there is a step-up  in mortgage rates’, he told the Financial Times. 

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

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

Rachel Springall, a finance expert at Moneyfacts, said: ‘Borrowers may be concerned to see a further fall in mort – gage availability but many lenders have been very vocal that their withdrawals are on a temporary basis amid interest rate uncertainty. 

‘Seeking advice from an independent broker would be wise, especially for those borrowers who have not yet started the mortgage process and are deterred from the level of choice and much higher mortgage rates than they were perhaps anticipating. 

‘The next few weeks will be crucial to see where lenders go from here, but we have already seen some new fixed deals arrive since last week.’

What to do if you need a mortgage 

Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, have been urged to act but not to panic, writes This is Money editor Simon Lambert.

Banks and building societies are still lending and mortgages are still on offer with applications being accepted. 

Rates are changing rapidly, however, and there is no guarantee that deals will last and not be replaced with mortgages charging higher rates. 

This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage and property value

What if I need to remortgage? 

Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate. 

Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal. 

Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. 

Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to  higher mortgage rates limiting people’s borrowing ability.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.

You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

> Check the best fixed rate mortgages you could apply for