UK homeowners face highest two-year fixed mortgage rates since 2008

Two-year fixed mortgage rates in the UK have surged to their highest level since the 2008 financial crisis, creating added financial strain for homeowners. The recent increase in mortgage rates puts pressure on individuals whose mortgage deals are expiring and need to remortgage soon, as they will now face significantly higher monthly payments.

Rate Rise and Impact on Borrowers:

According to data provider Moneyfacts, the average two-year fixed mortgage rate has risen from 6.63% to 6.66%, surpassing the previous peak of 6.65% reached last autumn. This surge means homeowners will be burdened with paying hundreds of pounds more per month. Additionally, the average five-year fixed mortgage rate increased to 6.17%, the highest level since October of the previous year.

Reasons for Rate Increase:

Fixed-rate mortgages are influenced by the yield on UK government bonds, and they have reached their highest levels since the financial crisis due to investor expectations of further rises in borrowing costs aimed at combating inflation. In June, the Bank of England unexpectedly raised its base rate by 0.5 percentage points to 5% as part of its efforts to address high inflation. Financial markets are currently predicting a 70% chance of another 0.5 percentage point increase to 5.5% at the August meeting, with interest rates potentially reaching 6% by November and at least 6.25% by next spring.

Limited Availability and Savings Rates:

The mortgage market has experienced a reduction in available deals, with Moneyfacts reporting a decrease from 4,631 to 4,344 residential mortgage products. Simultaneously, savings rates have not risen as rapidly as mortgage rates. The average rate on an easy access savings account remains unchanged at 2.53%.

The Importance of Longer Fixed Terms:

Borrowers are now facing the consequences of not fixing their mortgages for longer durations, such as the entire loan term, as is more common in countries like Germany. The market offers few 25-year mortgages, including Kensington’s option starting at 5.6%. By opting for longer fixed terms, homeowners could potentially mitigate the impact of rising mortgage rates.

IMF’s Perspective:

The International Monetary Fund (IMF) warned that the Bank of England may need to raise interest rates further and maintain them at elevated levels for an extended period to effectively combat inflation. In its annual assessment of the UK economy, the IMF supported the recent 0.5 per cent increase in official borrowing costs, emphasising the need for sustained efforts to lower inflation and anchor inflation expectations.

Seek Professional Advice:

The rise in two-year fixed mortgage rates in the UK to their highest level since 2008 poses challenges for homeowners, particularly those nearing the end of their mortgage deals. With expectations of further rate increases, homeowners should consider longer fixed terms, while banks and regulators strive to address the concerns of struggling households. The current situation highlights the importance of proactive financial planning and exploring available options to manage the impact of rising mortgage rates.

For those feeling apprehensive about their mortgage situation, seeking expert advice is crucial. Mortgage broker Dan Gladstone at Integrity 365, a Beavis Morgan group company, is available to provide assistance. Contact your usual Beavis Morgan partner or email Dan Gladstone directly at

In times of financial uncertainty, it is essential to explore all available options and seek professional guidance to navigate the challenges ahead.

If you find yourself concerned about your financial position amidst the rising mortgage repayment challenges, you can also turn to Moorfields Advisory, also within the Beavis Morgan group, for assistance. Moorfields Advisory helps individuals navigate complex financial situations. Our experienced professionals can provide guidance and support to those facing financial difficulties, offering tailored solutions to help alleviate the burden of rising mortgage costs and other financial concerns. Whether you need advice on debt management, restructuring, or exploring alternative financial options, Moorfields Advisory is there to assist you in safeguarding your financial well-being.