Mortgage rates hit their highest level in seven months: Two-year deals are now priced at 6.23% amid more evidence that middle income households are struggling to make ends meet
- Mortgage rates are rising because Bank of England interest rates are going up
Mortgage rates have hit the highest level in seven months amid increasing evidence that middle income households are struggling to make ends meet.
Figures from financial website Moneyfacts show two-year mortgage deals are now priced at an average of 6.23 per cent – a level not seen since November of last year.
And for five-year deals the average has increased to 5.86 per cent, also a seven-month high.
At the same time, a monthly tracker produced for Asda showed households in the bottom two-fifths of income brackets found their earnings were not enough to pay for essential goods and services.
And all except the top fifth of earners are seeing their spending power fall.
Figures from financial website Moneyfacts show two-year mortgage deals are now priced at an average of 6.23 per cent – a level not seen since November of last year
The number of available mortgages have also dropped sharply
Both sets of data suggest the squeeze on households is returning towards levels seen last autumn.
Back then, a mortgage crisis spurred by the disastrous mini-Budget under Liz Truss was eased after Rishi Sunak took over in Downing Street with a promise of economic stability.
And the wider cost of living burden was addressed with emergency subsidies for energy bills.
READ MORE: What to do if you can’t pay your mortgage: We explain your options if you are struggling to afford rising interest rates
With inflation proving stubbornly high millions are again finding it increasingly hard to manage their finances.
Mortgage rates are rising because Bank of England interest rates are going up and expected to rise further.
An unexpectedly sharp 0.5 percentage point hike in the Bank’s benchmark rate last week took it to 5 per cent, the highest level since 2008.
And an increase to 6 per cent by the end of the year is now fully priced in by financial markets.
That is because inflation, stuck at 8.7 per cent, has been more difficult to tame than expected.
The higher rates mean around 800,000 mortgage holders face a crunch when their fixed rate deals expire over the remainder of this year. A further 1.6 million will be hit in 2024.
It will mean they have to pay hundreds of pounds more each month to service their home loans.
Asda’s income tracker showed that, on average, household incomes were up by £1.85 a week in May compared with a year earlier.
But the richest earners are experiencing the biggest gains. And all are being eaten away by rising prices for the likes of food and housing.
For the poorest fifth of households, weekly income is on average falling £76 short of covering a basket of essential goods and services.
The number of mortgage deals being offered has finally started to dip after months of growth
Two-year mortgage deals are now priced at an average of 6.23 per cent – a level not seen since November of last year
Even the next group up on the income scale have over the past 12 months also been dragged into such a negative ‘discretionary income’ trap, the figures show.
They fell on average £9 short of earning enough to pay for essentials in May, the figures show.
The next two income brackets had £60 and £209 to spare respectively and the richest fifth were left with £754 a week after essentials.
But for all but the wealthiest 20 per cent, the measure of spending power was down compared with last year.
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