The mortgage pain is going to get worse

When the average two-year fixed mortgage hit 6 per cent last month, panic started to set in. For the 1.3 million homeowners set to renew before Christmas, many would now be facing interest payments three times higher than what they had originally paid. Chancellor Jeremy Hunt immediately called a meeting with lenders and customer representatives to formalise safety nets, including repayment holidays and moving people over to interest-only payments. 

But this was always set to be the start – not the end – of mortgage pain. Today we learn from Moneyfacts that the average five-year fixed-rate mortgage has also now passed 6 per cent. 

The last time five-year fixed rates reached this level was right after last autumn’s mini-Budget (which, once rolled back, promptly fell back down to 5 per cent by the end of the year). When mortgage rates jumped last year, it was due to the expectation that the Bank of England would have to hike interest rates rapidly to deal with Liz Truss’s fiscal loosening.