Two-year mortgage rates highest since 2015

TWO-YEAR fixed mortgages rates have surged above 3pc for the first time since 2015 as the Bank of England drives up housing costs in its battle against inflation.

The cost of an average two-year fixed loan climbed 0.17 percentage points this month to 3.03pc, according to the data company Moneyfacts – its first rise above the 3pc mark in seven years.

Mortgage bills have been increasing since the Bank of England signalled it would start raising interest rates late last year. A typical two-year deal is now 0.69 percentage points higher than in December. On a £200,000 mortgage, this difference would mean paying an extra £68 a month, or £16,300 in interest over a 20-year loan.

Meanwhile, rates on five-year fixes climbed for the seventh consecutive month to 3.17pc, the highest since May 2016. Longer-term fixes are becoming popular as homeowners lock in their costs amid the cost-of-living crisis.

The Bank of England increased rates to 1pc last week, the fourth consecutive rise from a historic low of 0.1pc, as it attempts to curb surging inflation.

High street lenders have repeatedly come under fire for quickly passing on Bank Rate rises to borrowers while being much slower to improve the rates paid on savings accounts.

Eleanor Williams, of Moneyfacts, said: “Remortgage borrowers, spooked by Bank of England rate rises, [are hurrying] to secure some financial stability and lock into a fixed deal to protect themselves from further rate increases.”