Mortgage rates soar with average two-year fixed rate edging close to 6%

A standard two year fixed rate mortgage is now 5.75%, up almost one whole percentage point since the mini-budget was announced last month, the BBC reported.

The pound plummeted after Chancellor Kwasi Kwarteng's budget on Friday, September 23, as markets were rocked with fear over potentially soaring interest rates.

It has led to more than 1,500 mortgage deals being urgently taken off the market. There were 2,258 residential mortgage products available on October 1, compared to 3,890 on September 1, Moneyfacts said. Mortgage rates climb as interest rates rise, and the Bank of England has been increasing the base rate since December in a bid to get a grip on soaring inflation.

In December, the average two year fixed rate mortgage was 2.34%. Back then, interest rates were 0.25%.

As of September 22, the base rate is 2.25%, with concerns the Government's new tax cuts announced in the mini-budget will see inflation continue to rise.

Mortgages are usually sold with two or five year fixed rates, so the mortgage rate rises will not be felt by everyone at the same time. It will initially hit first time buyers, those on tracker mortgages and standard variable rates, and those remortgaging at the end of their term, before slowly catching more and more people out as they re-mortgage.

In June, Nimblefins explained what the interest rate rise means for each type of mortgage. Speaking in the wake of the Pound falling to almost the same level as the US Dollar last month, Graham Cox, director of Bristol-based Self Employed Mortgage Hub: "If Sterling falls any more, it's almost certain the Bank of England will be forced to step in and hike the base rate again, probably by at least 0.75% on top of the 0.5% increase last week. Unless the government steadies the ship, we could be heading for a house price crash of 20-40% over the next couple of years.

"There's 1.8m borrowers coming off fixed rate deals next year. They simply won't be able to afford the mortgage payments, forcing them to sell or be repossessed."

However, Rachel Springall, a finance expert at Moneyfacts said urged mortgage holders not to panic: "Borrowers may be concerned to see a further fall in mortgage availability but many lenders have been very vocal that their withdrawals are on a temporary basis amid interest rate uncertainty.

"Seeking advice from an independent broker would be wise, especially for those borrowers who have not yet started the mortgage process and are deterred from the level of choice and much higher mortgage rates than they were perhaps anticipating.

"The next few weeks will be crucial to see where lenders go from here, but we have already seen some new fixed deals arrive since last week."