Two-year mortgage rates hit fresh 14-year high

Average mortgage interest rates are the highest they have been since the 2008 financial crisis, data suggests.

While U-turns in UK government policy are expected to calm markets and ease pressure on mortgage rates, this has not fed through to consumers yet, according to research from Moneyfacts.

The average rate for two-year fixed rate loan rose to 6.53% on Tuesday, Moneyfacts said.

That was the highest rate for such a deal since August 2008.

The average interest rate on a five-year fixed rate mortgage has risen to 6.36%, Moneyfacts said, the highest since November 2008.

Mortgage rates have been rising for months as central banks raise interest rates to try to get to grips with soaring inflation, but have increased sharply since September due to market fallout from the government's mini-budget.

While new Chancellor Jeremy Hunt has undone £32bn of his predecessor Kwasi Kwarteng's tax cuts, the pressure on mortgage rates has not yet eased.

At least 100,000 people per month are coming to the end of their current mortgage deal, and face steep rises in monthly repayments.

The number of mortgages available for homebuyers dropped sharply after the government's mini-budget, but has recovered somewhat - although there are still far fewer available compared with 2021.

As well as cutting the number of mortgages available, lenders have also been increasing mortgage rates.

One such lender is NatWest, which said "recent application volumes" were part of the reason.

Brokers have said there is still demand for mortgages but lenders are wary of being swamped with applications while uncertainty in the economy remains.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said the mortgage sector "remains volatile".