Average two-year fixed mortgage rises above 6% as Sunak rules out extra help for households

The average rate for a two-year year fixed rate mortgage deal has edged above 6% for the first time since December, as the prime minister ruled out extra help for struggling households.

Despite the increased financial pressure on homeowners, Rishi Sunak said there would not be any extra support, telling ITV's Good Morning Britain, the government needs to "stick to the plan".

On Monday, the average rate for a two-year fixed-rate mortgage stood at 6.01% according to the financial information service Moneyfacts.

Economics Editor Joel Hills on what will be more financial pain for many more people

The rate for a five year deal is at 5.67%

"I know the anxiety people will have about the mortgage rates, that is why the first priority I set out at the beginning of the year was to halve inflation because that is the best and most important way that we can keep costs and interest rates down for people," Mr Sunak told GMB.

"We've got a clear plan to do that, it is delivering, we need to stick to the plan."

"But there is also support available for people. We have the mortgage guarantee scheme for first-time buyers and we have the support for mortgage interest scheme which is there to help people as well."

He added: "But look, that is why my first priority is to halve inflation, one of my other priorities is to cut the waiting lists."

A homeowner taking out a two-year fixed-rate mortgage could end up paying over £300 per month more than if they had taken out a deal a year ago, according to analysis by a financial information website.

Someone with a £200,000 mortgage could now end up paying just under £1,290 per month, Moneyfactscompare.co.uk found.

This was based on the average two-year fixed-rate mortgage rate on the market on Monday, at 6.01%.

But if they had taken out a two-year fixed-rate deal back on June 1 2022, when the average rate was 3.25%, they could potentially have paid just under £975 per month, according to the calculations carried out for the PA news agency.

This adds up to a difference of just over £315 per month – or more than £7,560 over the two-year mortgage period, according to the website, whose calculations were based on a borrower paying their mortgage back over 25 years.

Around 2.4 million fixed-rate mortgages are due to end between now and the end of 2024, according to figures from UK Finance.

Many of these homeowners could be in for a bill shock when they come to remortgage, having been used to paying significantly lower rates.

According to the Resolution Foundation think-tank, annual mortgage repayments are set to rise by £2,900 for the average household remortgaging next year.

The development comes comes as the former deputy governor of the Bank of England, Sir Charles Bean, said protecting people with mortgages from the pain of interest rate increases would be "risky territory" for the government.

Levelling Up Secretary Michael Gove said he was "concerned" by events in the mortgage market.

Mr Gove told Sky News's Sophy Ridge On Sunday show: "It is a very difficult situation for hundreds of thousands of people and that is why it's vitally important that the government does everything that it can in order to help people with the cost of living."

He added: "When it comes to mortgages, it's the independent Bank of England's interest rate decisions that will govern that, but we are looking at everything that we can do in order to help homeowners through this difficult period."

The squeeze on mortgage holders is set to tighten as the Bank of England (BoE) gets ready to hike interest rates for the 13th time in a row, experts have said.

Some analysts are expecting UK interest rates to rise by another 0.25 percentage points on Thursday and say there could be more increases on the horizon.

Such a rise would take the rate to 4.75%, helping to drive the cost of borrowing and hitting more than a million mortgage holders whose fixed-rate deals are due to expire soon.

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