Homeowners who took out two-year fixed mortgages on the eve of Liz Truss’s mini-Budget two years ago face an annual rise of over £3,800 to their repayments, new analysis shows.

In an infamous speech in September 2022, Ms Truss’s chancellor Kwasi Kwarteng delivered a set of unfunded tax cuts. Swap rates, which determine the rate at which banks lend to one another, began to climb and mortgage lenders pulled their best rates.

Average mortgage rates went above 6 per cent and although they have since recovered, with many lenders now offering rates of below 4 per cent, they are still well above the level they were in the summer of 2022.

Analysis by lender MPowered using Bank of England and industry figures shows that around 38,000 households were offered two-year fixed rate mortgages by major high street lenders in August 2022, the month before the mini-Budget, at an average interest rate of just 2.59 per cent.

But those same borrowers will need to remortgage this month with the average rates now being offered by the same lenders on such a deal coming in at 5.08 per cent.

For a typical borrower this means a payment increase from £1,101 to £1,421 per month, an increase of £320, according to the company’s calculations.

Stuart Cheetham, CEO of MPowered Mortgages, said those with mortgages expiring this month faced “a seemingly unwinnable game of stick or twist”.

“Few will want to revert to their current lender’s standard variable rate, and as of this week, those remortgaging onto a fresh two-year fix with one the high street lenders will see their interest rates increase significantly,” he said.

“In many ways they have been lucky. By locking in a mortgage on the eve of the mini-Budget, they secured a low interest rate and their monthly repayments have stayed the same even as thousands of others saw theirs go up,” he added.

MPowered’s calculations are based on borrowers who took out loans two years ago having repaid £13,000 of their original loan over the past two years and leaving their loan term unchanged at 23 years.

The good news for these borrowers is that rates are beginning to come down, and for those with the biggest deposits, experts say they could reach 3.5 per cent at the end of the year.

Although 5.08 per cent is an average rate across major lenders, far better rates are available for many, with the cheapest already coming in at below 4 per cent for those buying, and close to 4 per cent for those remortgaging.

Mr Cheetham said MPowered had cut rates twice in the space of a week and that the “general trend” for rates could be downwards over the coming weeks and months.

Economists have told i that two interest rate cuts this year is feasible, something financial traders have now priced in.

This will likely entice lenders to cut their mortgage rates further, in good news for homeowners and potential buyers.

The prospect of even cheaper mortgages will come as a political boost for the Government. During the general election campaign, Labour repeatedly accused the Conservatives of driving up borrowing costs because of the markets turmoil sparked by Ms Truss during her brief time in power.

In reality, the rates on offer now have little to do with Truss’s tenure, and are instead based on high interest rates.

But Sir Keir Starmer promised shortly after becoming Prime Minister that mortgage interest rates would come down under his leadership with falling rates coming as a relief to the Labour Party.



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