Average two-year mortgage rates have surpassed 5pc for the first time in 13 years following unprecedented turmoil in the market.
The typical deal fixed for two years now charges 5.17pc interest – the first time it has surpassed 5pc since November 2009, according to analyst Moneyfacts.
An average two-year deal is also now more expensive than a five-year fix, which currently sits at 5.1pc. This suggests lenders are nervous about what interest rates might do in the coming year.
It comes as banks pulled mortgage deals at a record rate this week as the pound dropped and markets priced in higher-than-expected interest rate rises by the Bank of England.
Since the fallout began on Monday, banks and building societies have pulled 1,607 deals from the market, with a record 935 disappearing overnight on Tuesday. Since the Chancellor delivered his mini-Budget last week, which triggered the economic downturn, the number of mortgages has shrunk by more than 40pc.
Eleanor Williams, of Moneyfacts, said the number of mortgages disappearing from the market this week had been “unprecedented”.
Ms Williams added: “Numerous lenders have temporarily quit the market entirely amid the economic uncertainty, although a couple have cautiously returned with some of their deals today [Friday]. Rate rises are still continuing apace and fuelling significant rises to the average rates on offer.”
It means hundreds of thousands of borrowers coming to the end of their fixed-rate deal in the coming months will be hit with higher rates which will dramatically increase the cost of their monthly mortgage payments.
Nationwide has increased its rates by between 0.9 and 1.2 percentage points. The cheapest two-year fixed-rate is now 5.59pc, up from 4.44pc, which would see the same borrower’s monthly payments surge from £1,509 to £1,720 – up by £211 a month.