Proactive Investors - UK mortgage rates are heading towards 6% as the squeeze on borrowers tightens, with one think tank predicting 3mln homeowners risk having their savings wiped out.
The average rate on a two-year fixed mortgages rose to 5.92% yesterday, up from 5.9% on Wednesday, and 5.26% at the start of last month.
Average five-year fixed mortgage rates hit 5.56%, up from 5.54% 24 hours earlier and 4.97% at the beginning of May.
Analysis from the Institute for Fiscal Studies said the higher rates would see 2.9mln middle income mortgage holders exhaust their savings as well as borrow cash to help make ends meet.
On Monday, the Centre for Economics and Business Research estimated homeowners will have to spend nearly an extra £9bn in interest over 2023 and 2024.
It calculated 2.5mln homeowners will come to the end of fixed-rate deals across 2023 and 2024 while a further 1mln are on variable rate deals.
Higher-than-expected inflation and wage data has prompted City scribes to ratchet up forecasts for interest rates which are now expected to peak at 5.75%, compared to predictions of 4.75% only a month ago.
Andrew Wishart, who runs housing service at Capital Economics, said if the Bank of England base rate rises from 4.5% to 5.75%, the average quoted rate for a five-year fixed-rate mortgage would likely rise to 6.3%.
A buyer taking out a typical £200,000 loan would face an extra £1,920 a year in payments if rates hit 6.3% compared to where they were in early May.
High street lenders have scrambled to keep up with the rapidly changing rate landscape. Nationwide has become the latest to increase its mortgage rates, lifting new fixed rates by up to 0.7 percentage points.
In the last week, HSBC (LON:HSBA) has pulled mortgage deals twice while Santander (BME:SAN) was also forced to temporarily withdraw products while it repriced offers.
Atom Bank said today it was also raising rates by between 0.25% to 0.6% on certain products.