Mortgage deals pulled: average two-year fixed rates surge to highest level in 15 years

The choice of mortgage products has fallen since 24 May - and now rates for two-year fixed deals have now surpassed the levels seen in the aftermath of last autumn’s mini-budget.

(Image credit: Getty Images)

Borrowers continue to see mortgage deals pulled and average interest rates rise after the Bank of England raised the base rate from 4.5% to 5% last month.

 After almost two months of market turmoil, the average two-year fixed-rate residential mortgage rate has reached  6.79%, according to data analyst Moneyfacts. This surpasses the levels seen in the aftermath of last autumn’s mini-budget, reaching its highest level in 15 years. 

Figures from the data analyst Moneyfacts show the choice of residential mortgage products has dramatically fluctuated and fallen by almost 16% since 23 May: 4,495 on 20 July - that’s 890 less than the 5,385 deals that were available on the day before the   announcement of worse-than-expected inflation figures.

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NatWest is the latest to make changes, amid “changing market conditions”, increasing the cost of its fixed rate mortgages for new purchase and remortgage customers by up to 0.4 percentage points while Virgin Money is increasing the rates on selected fixed deals for remortgage by up to 0.22 percentage points. 

Several lenders have temporarily removed mortgage products before putting them back on sale in recent weeks, as mortgage rates have increased, amid expectations that interest rates will remain higher for longer.

The drop in product availability will affect around 116,000 households that are coming off fixed-rate deals this month. Over 1.4m households already face mortgage rate hike in 2023.

All 639,000 homeowners on variable rate mortgages linked to the base rate will see an automatic increase in their payments.

The 0.5 point increase could add £47.43, according to the trade association UK Finance.

Lenders hike mortgage rates

Lenders are now increasing mortgage rates across the board, with the typical two-year fixed rate standing at 6.79%, a typical five-year now at 6.31% as of 20 July according to Moneyfacts. 

Figures compiled by the IFS think-tank estimates that as a result of soaring mortgage rates 1.4million Brits face losing at least a fifth of their disposable income. 

Across the UK households are set to pay nearly £280 more each month, rising to nearly £360 for 30 to 39-year-olds. 

But the hit will be 'substantially larger' for some households, costing them 20% or more of their disposable income.

Lenders are also limiting the number of first-time buyer mortgages: Mortgages requiring a 5% deposit numbered 239 on 23 May (the day before the worse-than-expected inflation announcement) - it is now 215 (as of 20 July).

The choice of buy-to-let mortgages has also fluctuated and dropped by 12% over the same period: from 2,748 deals to 2,393– that’s a reduction of 355 deals.  

Homeowners struggling with soaring mortgage rates will get more flexibility with their payments after bank bosses met the chancellor, Jeremy Hunt, in Downing Street and agreed to a series of support measures.

Support includes a temporary switch to interest-only mortgage and extensions to mortgage terms to bring monthly payments down.

Should I overpay my mortgage?

Rising mortgage rates can get homeowners thinking about overpaying their mortgage as a way to protect themselves.

Our mortgage overpayment calculator reveals how your monthly repayments may change and help you decide if it is worth it. 

Rachel Springall, finance expert at Moneyfacts, said: “Product choice has fallen, and as may be expected, average fixed mortgage rates are on the rise. This volatility is down to the concerns surrounding future interest rate hikes, and lenders are reassessing their propositions.

She adds: “It is vital that borrowers seek advice to assess the situation and to find a mortgage that suits their circumstances.”

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Katie Binns

Katie is deputy editor of Times Money Mentor and long-time contributor to the Sunday Times where she started on the Irish desk in 2012 and spent 10 years covering news, culture, travel, personal finance and celebrity interviews. 

Her investigative work on financial abuse has examined the response of banks, the Financial Ombudsman and the child maintenance service to victims, and resulted in a number of debt and mortgage prisoners being set free - and a nomination for Best Finance Story of the Year at the Headline Money awards in 2021 and 2022. 

Katie was also shortlisted for Freelance Journalist of the Year at the Headline Money awards in 2022, 2023 and 2024 and won Personal Finance Journalist of the Year at The British Bank Awards 2022.