Average two-year mortgage rate breaches 6%

A typical two-year fixed mortgage deal now has an interest rate of more than 6% for the first time since December.

Mortgage lenders have been pulling and re-pricing deals at a rapid rate in recent weeks, creating worry for those seeking new deals.

The interest rates on mortgages soared after last autumn's mini-budget before calming slightly.

Now, worries over the implications of rising prices have pushed borrowing rates higher again.

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

Although the peak seen after mini-budget was 6.65% in October last year, the rate fell below 6% at the start of December before dropping further, but has climbed sharply again recently.

A typical five-year fixed rate is now at 5.67% compared with last year's peak of 6.51%.

Recent data on wages and rising prices mean markets anticipate that inflation and interest rates will stay higher for longer in the UK than previously expected, which has been reflected in the funding cost of mortgages.

That has been reflected in rates lenders are charging new borrowers, and those remortgaging. Lenders have been pulling deals and putting up rates at short-notice, while some have been inundated with demand and so forced to pull or raise rates again.

More than 400,000 people will see their existing fixed deals end between July and September, a comparatively high number. Many face the prospect of having to budget for monthly repayments that are hundreds of pounds more expensive than they have become accustomed to.

The base rate, set by the Bank of England's Monetary Policy Committee and currently at 4.5%, will be reviewed next week and is widely expected to increase for the 13th time in a row. The latest official data on how fast prices are rising will be published the previous day.