"It will no doubt create many sleepless nights for homeowners across the country that are having to face the prospect of needing to remortgage soon."
The average two-year fixed rate rose to 6.66% today, up from 6.63% yesterday, surpassing the levels seen after last autumn’s mini-Budget and reaching its highest level in 15 years.
Mortgage advisers responded with their views on what impact ever-rising rates will have on the housing market and where rates might go next.
Riz Malik, founder and director at R3 Mortgages: "666 is the number of the devil, and with average two-year fixed rates hitting 6.66%, many homeowners will be in a personal hell. The government and the Bank of England are equally to blame for this current mess. As rates surpass the rule of Truss and Kwarteng, it’s only fair that Sunak, Hunt, Bailey and the whole MPC suffer the same fate."
Graham Cox, founder at SelfEmployedMortgageHub.com: "Expect the mother of all house price crashes if these rates or higher remain in place throughout the rest of the year, which is likely without some positive news on inflation very soon. Homeowners, faced with a huge spike in borrowing costs when they come to remortgage, will have no option but to sell up. When everyone is trying to jump ship at the same time, it can only lead to one thing: slashed house prices. Andrew Bailey and the rest of the Bank of England MPC have been asleep at the wheel and should hang their heads in shame. They had one job to do and failed miserably."
Gary Boakes, director at Verve Financial: "Unfortunately, this is going to have a real impact on individuals and families over the next two years. I have already had clients talking about using the six months interest-only option when their rates increase. The difficulty is this is exactly what the government wants as this will stop people spending so much on their lifestyle, and while I agree the ultimate goal is to lower inflation it just doesn't sit right with me that people may lose their homes to do it. Having had a 6.2% rate personally in 2008, I know it is going to be a hard slog for many families."
Lewis Shaw, founder and mortgage expert at Shaw Financial Services: "The continued march upward for mortgage rates will be very worrying for owners about to come to the end of a fixed rate deal. In many cases, we're seeing mortgage payments increase by an average of 50%, where people are exiting rates of 2% and below. We'll likely see an increase in forced sales as people look to downsize. However, the problem then arises that a flood of property coming to the market while buyer demand slumps can only lead to house prices reducing."
Scott Taylor-Barr, financial adviser at Barnsdale Financial Management: "The continued increase in mortgage rates is driven by the financial markets' view that the Bank of England will be forced to continue to raise base rate to try and bring inflation back to their 2% target. Unfortunately, everything seems to be going against them with inflation remaining stubbornly high, which has been fuelled further today by wage figures that have jumped by around 7%, meaning the Bank's calls over the past year for employers and employees to not fuel inflation with big pay settlements has not worked. The Bank however is not the only entity that can battle inflation, in fact the Bank's ability is constrained by the tools it has available, which are limited. The Government though could increase key taxes such as income tax and VAT, which would have a more instant and deeper impact on controlling inflation than increasing interest rates, which only impacts those with debts and only those with debts that are not fixed."
Jamie Lennox, director at Dimora Mortgages: "With the average rate reaching this level, it will no doubt create many sleepless nights for homeowners across the country that are having to face the prospect of needing to remortgage soon. The real concern is each day the outlook worsens and there is no light at the end of the tunnel in sight. The sad reality is not even the mortgage charter will save many from the inevitability of losing their home later down the line and real question marks remain over whether enough has been done."
Justin Moy, managing director at EHF Mortgages: "The interest rate train has no means of stopping at the moment, and inevitably we will see the usual activity of repricing products throughout the week. It will unfortunately be more targeted pain for mortgage holders. Savers will be delighted, they have more interest to spend, and we fuel inflation by improving the wealth of the non-borrowers. Companies are having to pay high wages to retain staff and to combat other costs of living, and inevitably the country will quickly grind to a halt. It's time for the Chancellor to slow the train down, stop at the next station, and find a better way to control spending, not just penalising homeowners."
Michelle Lawson, mortgage and protection adviser at Lawson Financial: "We have to be careful not to sensationalise the interest rates and quote 'average' rates as this will include higher interest rates for higher risk business such as those with applicants with impaired credit. In truth, on my sourcing system this morning, I have two-year fixed rates for a purchase at 50% loan to value starting at circa 5.7-5.8%. For product transfers, staying with the same lender, at the same loan to value, starting at 4.7% to 5.64%, and changing lender at 5.8%-5.9%. The public need to make sure they have accurately represented information and take advice so they can make informed decisions. The sad thing is, it is the people coming through for mortgages in the coming months who will suffer with this mess that has been caused."
Elliott Culley, director at Switch Mortgage Finance: "Further misery for mortgage holders. There seems to be no light at the end of the tunnel. Some changes are drastically needed as these rates are having a huge impact on clients. It would be good to see a different approach brought forward by the Bank of England rather than the continued increase in the base rate, which so far has failed to make an impact."
