Bond-market turmoil lifts UK five-year mortgage rates to 6% ahead of any Bank of England move

Lenders are pricing a decision the Bank of England has not taken. Bond-market turmoil has raised expectations of a base-rate rise, and most big banks and building societies have put up their prices in recent weeks ^[3]. The BBC ties the higher cost to lenders to international concern over rising prices, interest rates and government borrowing costs ^[12], and to global economic uncertainty since the Iran war began ^[15].

The 99% fall is a count of products on offer, and it describes what a borrower shopping today can buy. Moneyfacts' drop from 1,494 sub-5% deals to nine leaves 1,485 fewer available ^[1], close to the BBC's figure of about 1,500 ^[13]. The average moves more slowly. At 6.00%, the five-year rate is 1.06 percentage points above the 4.94% Moneyfacts recorded at the start of February ^[2].

For an employer, the cost reaches staff on dates already written into their mortgage contracts. A fixed rate does not change until the deal expires, usually after two or five years, and the vast majority of homeowners and buyers hold this kind of mortgage ^[14]. The HomeOwners Alliance's £158 monthly gap on a £250,000 loan ^[8] comes to £1,896 a year ^[3]. The repricing took about a month ^[4]. The renewals that pass it into household budgets will arrive over the next two to five years, as existing deals run out ^[14].

Some borrowers had hoped rates would settle. "Borrowers who were hoping mortgage rates would stabilise will be disappointed," said Rachel Springall, a finance expert at Moneyfacts ^[7]. The case for patience is that none of this came from a base-rate change ^[5], and bond markets can reverse. The answer is timing. A colleague who renews this quarter fixes at this quarter's price until the deal expires ^[14], so a later fall in swap rates reaches them only at their next renewal. An employer waiting for the Bank's next decision gets a clearer signal, and gets it after some of its staff have locked in.

The evidence here covers households and the housing market. It shows borrowing costs rising for mortgage holders before any base-rate move; the sources do not measure what lenders charge companies, or how many employees face a renewal this year. I think financial strain among staff renewing in the coming months is a reasonable expectation, and its size for any one employer depends on when its people's deals expire. Ian Harris, president of the estate agents' body NAEA Propertymark, said: "For some buyers, even a relatively small increase in monthly repayments can mean they have to reduce their budget or step back from a purchase altogether." ^[10]