The average two-year fixed-rate residential mortgage hit 6.66% this morning, pushing it above the level at the peak of the mini-Budget in October to a 15-year high.  

It rose by 3 basis points from Monday and takes the two-year rate to its highest level since 2008, data from Moneyfacts shows.  

In the aftermath of former Chancellor Kwasi Kwarteng’s September fiscal statement, the two-year rate hit 6.65% the following month, as markets responded to the package of unfunded tax cuts.   

Rates began rising last month following the Bank of England hiking the base rate by 50 basis points to 5%, its 13th rate rise in a row since December 2021, taking it to the highest level in 15 years. The central bank is battling to calm inflation, currently at 8.7%.  

The news comes as regular pay grew by 7.3% in the March to May period from a year earlier, according to the Office for National Statistics today, fuelling expectations that the central bank will push ahead with its rate rise policy.  

Financial markets are currently betting that the BoE bank rate will hit 6.5% next March as it battles inflation, while JP Morgan forecasts the rate could touch 7% next year.  

Quilter mortgage and financial planning expert Charlotte Nixon says: “The UK is in a difficult place with its battle against inflation and as such interest rates are going to have to keep going up in the short-term.   

“This is going to feed into the mortgage market and as such this is not the top of the peak – more pain is to come.  

She adds: “The chaos in the mortgage market is hitting house prices and this is going to cause some uncertainty over the rest of the year as servicing costs become harder to manage and affordability is tested to its limits.   

“For those who have a fixed rate deal ending in the next six months, the message is clear – act now or you could face exorbitant costs on the standard variable rate that you will default on to.  

“For those looking to take out a mortgage now, there are options to consider to lessen the burden, though they do come with consequences.   

“Taking out a mortgage with a longer term can help reduce your monthly payments, however, the cost over the whole period will be greater.   

“Although a longer term does mean that you will pay more in interest over the full term it does reduce your monthly outgoings.   

“Once you come to the end of your deal you could opt to remortgage to a shorter term, so it doesn’t necessarily have to be forever.”  

The average five-year fixed-rate residential loan also rose 4 basis points today to 6.17%.