Two-year fixed-rate mortgage deals now at the highest rate seen for 15 years

The average price of a two-year fixed-rate mortgage has risen to the highest level in almost 15 years, topping the heights seen in the immediate aftermath of the Liz Truss-inspired mini-Budget last autumn.

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Financial data service Moneyfacts said this morning that the average cost of a two-year fixed-rate deal had risen to 6.66%, above the 6.65% seen on 20 October last year, at the peak of the post-mini Budget financial panic.

The recent increases in rates are adding hundreds of pounds to the cost of homebuyers looking to buy new properties, and are driven by the Bank of England’s need to tackle stubbornly high inflation figures.

Average mortgage rates had dropped back to as low as 5.3% in the spring before recent inflation fears saw lenders pull products and reprice their loan deals.

Moneyfacts said the two-year fixed-rate price was the highest seen in the market since August 2008, before the widespread impact of the global financial crisis. However, it added that the average cost of five-year fixed-rate deals, which rose yesterday to 6.17%, was still well below the 6.51% this number reached in October last year.

>> See also: Brickmaker cuts jobs as housing recovery stalls

Rachel Springall, finance expert at Moneyfacts, said the latest rise would be “disappointing” news for borrowers and might cause buyers to “pause their home ownership plans”. She said: “After the fiscal announcement, fixed mortgage rates rose sharply, which resulted in a worrying environment for potential buyers and those needing to remortgage.

“There are still some competitive deals out there for consumers to choose from, so it’s vital that borrowers seek advice to go through their options.”

The news came as brickmaker Forterra announced it was starting a redundancy process amid concerns that a hoped-for recovery in the housing market had slowed down during the spring. The firm said that because of recent interest rate rises it was now assuming “only a modest improvement in trading conditions” in the second half of the calendar year.

Last month Capital Economics predicted that the number of house sales was likely to drop 25% this year and not recover until 2025 given the recent rises in average mortgage interest rates.

Housebuilding completions have already dropped by 12% in the first quarter of the calendar year. 

Labour’s shadow housing secretary Lisa Nandy said the figures were a symptom of “Tory economic failure”.

She said: “The Tories have inflicted households with a mortgage bombshell, let renters down and failed to build the homes we need.

“Labour has a plan to start fixing this crisis. We would stop households missing out on the mortgage support they need by making measures mandatory, we will give greater rights and protections to renters, and we will take the tough choices to get Britain building.”