A key U.K. mortgage rate topped 6%, days ahead of a Bank of England rate decision where the central bank is again expected to lift interest rates.
The average rate for the two-year fixed-rate mortgage stood at 6.01%, according to Moneyfacts.
That’s a big shock as more than 1.4 million households this year face or have faced renewal, according to data from the Office for National Statistics. The ONS said the majority of those mortgages being renewed were fixed at rates below 2%.
Unlike in the U.S., typical U.K. mortgages last between two and five years, and then get rolled over.
The Bank of England on Thursday is expected to lift interest rates for the 13th consecutive meeting by a quarter-point to 4.75%. There is a critical inflation report on Wednesday, ahead of the decision, which is expected to show consumer prices slowing to 8.4% year-over-year in May, from 8.7% in April.
The 2-year gilt TMBMKGB-02Y, 5.005% rose as high as 5% on Monday, and the pound GBPUSD, -0.10% was trading above $ 1.28.
“With stronger than expected data the risks of overtightening from the BoE look non-existent to us. The market prices a further 133bp of hikes, more than before the February policy meeting when the BoE hiked 50bp,” said economists at Bank of America.