UK mortgage rates have soared as the Bank of England raised borrowing costs over the past 18 months. But the latest jump, which carried the interest rate on the average two-year loan above 6 per cent this week, has been driven by frenzied speculation in financial markets about what the central bank will do next as inflation remains stubbornly high.
Why are mortgage rates rising?
A flurry of hotter than expected inflation data in recent weeks has led to a big rethink among investors about how far the BoE might have to lift interest rates. That has led to a sharp sell-off in short-term UK government debt, which is highly sensitive to moves in BoE rates. Two-year gilt yields, which rise as prices fall, climbed above 5 per cent for the first time since 2008 on Monday.