UK mortgages: average rate on a two-year fixed deal soars to nearly 6%
The average rate on a two-year fixed mortgage has jumped to just under 6%, according to data released on Tuesday, dashing hopes that government efforts to calm the financial markets might ease the cost of home loans.
Amid warnings from brokers that 95% mortgages could be the next casualty of the financial uncertainty triggered by Kwasi Kwarteng’s mini-budget, research firm Moneyfacts said the average new two-year fixed rate jumped to 5.97% on Tuesday, having already risen to 5.75% on Monday.
Lenders effectively pulled down the shutters after the market turbulence caused by the 23 September mini-budget, withdrawing 40% of deals last week. Many of the biggest lenders have now re-entered, with Nationwide, NatWest, Barclays, Virgin Money and Skipton all returning with new offers.
While there had been hopes in some quarters that the government’s 45p tax U-turn on Monday and the slightly calmer market conditions that have followed, might translate into slightly cheaper new mortgage deals; so far the opposite has happened.
Data shared with the Guardian shows that the total number of new 95% mortgage products available has fallen to 129 – less than half the number on sale on the day of the mini-budget, because of fears homeowners could end up in negative equity if house prices were to fall by 10% or more.
The average new five-year fix was priced at 5.75% on Tuesday, up from 5.48% on Monday.
The average two-year fix has surged from an average of 4.74% on 23 September, and 2.34% at the start of December last year.
Chris Sykes, the technical director at the broker Private Finance, said that last week lenders “were withdrawing things just to give themselves a few days to breathe. Most of those on the residential side are back in the market
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