Mr Brown said: “In addition to government bond yields, inflation remains at a 40-year high and bank rates are still expected to rise quite aggressively. Markets expect it to peak at nearly 5.5 percent in May next year and remain close to that for the rest of the year. Mortgage borrowers should definitely not breathe a sigh of relief.”
The bank interest rate is currently 2.25 pc and by Friday, markets had priced in a full percentage point increase in November, followed by a second percentage point increase in December.
Samuel Tombs, Pantheon Macroeconomics analyst, said: “Mortgage rates will remain at levels that will force households that need to refinance in the coming months to cut spending.”
There are 7.4 million British households with a mortgage on their main home. The Resolution Foundation has predicted that 1.7 m face an increase in repayments at the end of this year, including 500,000 households entering into new fixed-rate deals. Next year, another 900,000 borrowers will face higher costs.
The think tank warned that a quarter of all mortgaged households, about 1.8 million borrowers, will have lost at least 10 percent more of their income to higher housing costs by the end of 2024.
Interest rates have risen consistently this year, but rose at the fastest rate ever in the weeks following the mini-budget. Mortgage rates are now their highest since the financial crisis, with the average two-year fixed rate yesterday at 6.47 pc. In October last year, the average fix for two years was 2.25 percent.
Gaurav Shukla, of broker Home Me, said: “I don’t believe yesterday’s changes will have much of an impact on interest rates as inflation is still rising. The Bank of England thinks this may be the best time to raise bank rates when lenders are already so high.”