Brokers have raised concerns these figures may cause ‘panic and instability’ and are attempting to put the data in context to help borrowers who are worried about their options.
The data from Moneyfactscompare.co.uk has revealed the typical two-year fixed rate was now 6.01%. It said average five-year fixed rates are now 5.67%.
But brokers have said these typical figures took into account specialist mortgage deals which have rates as high as 7% or 8% as well as those at the cheaper end of the market.
Hannah Bashford, director at Model Financial Solutions, said: “An average two-year fixed rate of 6% sounds scary and will certainly grab headlines but in reality there are still plenty of rates available just above 5%.”
She added: “Consumers are worried, though, and it is the right time to seek expert advice.”
The data comes amid calls for the government to intervene and support households struggling to make mortgage repayments.
Ed Davey, leader of the Liberal Democrats, said: “The time for the government to step in is now, anything else will be a disaster for struggling families worried about losing their homes.
“This government is sitting on their hands, giving no help to ordinary working people who suffer. It’s just plain wrong.
“Liberal Democrats are calling on Rishi Sunak to finally listen to those who need help and immediately end this mortgage horror show with a Mortgage Protection Fund.”
Yesterday Michael Gove, cabinet minister, said plans to help struggling mortgage borrowers were ‘under review’.
In the meantime, brokers have been attempting to avoid panic and support borrowers who are looking for new deals and worrying about soaring rates.
Interest rates set to rise this week and repayments predicted to soar
On Wednesday the latest inflation data is due to be released. This is significant because the Bank of England (BoE) has been raising interest rates in a bid to lower inflation.
If the Consumer Prices Index shows inflation has not been reduced significantly, it’s likely the BoE will go ahead with their predicted rate hike on Thursday.
A report from the Resolution Foundation warned home loans are now greater than earnings. It said 800,000 people due to remortgage in 2024 would pay an average of £2,900 a year more.
However, Ross McMillan, owner and mortgage advisor at Blue Fish Mortgage Solution said: “In the current uncertain economic climate, the average mortgage rate across all levels has unquestionably risen in recent weeks but it’s important, beyond sensational headlines, that context is also applied.
“Alongside the initial deal length, loan-to-value (LTV) bands continue to have a bearing on lender risk assessment and associated rates and the higher rates focused on are most prominent at the peak of lenders’ risk areas, namely 95% LTV.
“For many people remortgaging, they will be looking at significantly lower loan to values with rates closer in many instances to 5% currently.
“The hope remains that inflation figures exceed expectations this week and the Bank of England refrains from further rate hikes and offers some respite from the volatile marketplace even if temporarily.”
Need guidance on what to do mortgage-wise if you are moving, remortgaging or a first-time buyer? We rounded up expert advice in this article.
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