Thousands of homeowners across Norfolk and Suffolk are facing higher mortgage repayments at a time when many households are already struggling with rising living costs.
According to Norwich-based comparison website, Moneyfactscompare.co.uk, the average two-year fixed rate deal is now more than 6pc, while the average five-year fixed rate deal stands at 5.67pc.
Rachel Springall, from Moneyfacts, described these as "worrying times for borrowers".
She highlighted that the last time the average two-year fixed rate mortgage was 6pc or more was in December 2022 when it stood at 6.01pc.
Prior to that, two-year fixed rates have not been more than 6pc since November 2008.
The Resolution Foundation predicts that current mortgage rates will continue to increase, with the average two-year fixed rate hitting 6.25pc in 2023.
According to the Bank of England, around 1.3 million households are expected to reach the end of their fixed-rate term from April to the end of the year.
This could see a significant number of homeowners facing significantly higher mortgage repayments before the start of 2024.
Why are mortgage rates rising?
Mortgage lenders tie their rates with the Bank of England interest rates.
During the pandemic, this fell to a record low of 0.1pc - leading to banks slashing their rates.
Since the post-pandemic inflation crisis, interest rates have continued to rise and now stand at 4.5pc with a further hike expected this week.
This has resulted in lenders significantly increasing their mortgage rates.
Why is the Bank of England increasing interest rates?
The Bank of England increases interest rates as a way to lower inflation and, with the causes of the current inflation - price increases in the service sector and wage growth - remaining elevated, experts predict this will prompt further interest rate rises.
“The scale of the market reaction indicates a lack of confidence that the Bank has done enough so far to bring inflation under control,” Andrew Goodwin, chief UK economist for Oxford Economics said.
“It also implies that the MPC [Monetary Policy Committee] will be willing to act further.”
Financial markets are now predicting there to be four further rate hikes, taking it to a peak of 5.75pc, analysts said.
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Will the government step in and help?
Protecting people with mortgages from the pain of interest rate increases would be “risky territory” for the government, the former deputy governor of the Bank of England, Sir Charles Bean has said.
His comments came as 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.”
How will rising mortgages affect the housing market?
Richard Donnell, from real estate firm Zoopla, said: “Rising mortgage rates will hit the buying power of new buyers who don’t have a mortgage arranged.
Those that have got offers locked in at closer to 4pc will most likely push ahead with purchases where they feel secure in their work and/or need to move for job or family reasons.
“Those who were going to move but for less needs-based reasons may look to pull out of deals and wait over the summer."
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