(Bloomberg) -- British mortgage costs keep climbing, even after Chancellor Jeremy Hunt scrapped most of a controversial economic plan that had sent home loan rates to their highest in over a decade.
The average two-year fixed-rate home loan jumped to 6.53% on Tuesday, rising further above the 14-year high reached last week, according to Moneyfacts Group Plc. The average five-year fixed-rate deal climbed to 6.36% after breaching 6% for the first time since 2008 a fortnight ago.
On Monday, Hunt reversed almost all of the tax cuts and giveaways that were announced by his predecessor Kwasi Kwarteng in September. The move prompted a surge in UK government bonds, but it will take several days for banks to factor the corresponding fall in yields into the mortgage prices they offer.
“While we don't expect mortgage rates to fall in the short-term, stability in the swaps market should slow the pace of rising mortgage rates relative to some of the worst case scenarios that looked possible in the days following the mini-budget,” said Simon Gammon, managing partner at broker Knight Frank Finance. “Only time will tell as to whether this is a temporary reprieve.”
With rates at 6%, a two-year fixed-rate mortgage will cost about £10,000 ($11,309) more during the fixed period than the same product issued last December, when rates were about 2.34%, according to Moneyfacts data. That's based on a mortgage of £200,000 borrowed for 25 years.
“Our advice to borrowers remains the same: act as soon as possible to review your options,” Gammon said. “In the event mortgage rates do fall, you can always look at your options to take advantage of any such move.”
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