Estate agents are facing a potential affordability squeeze as increasing wholesale borrowing costs could lead to higher mortgage rates. A global bond market sell-off has driven UK government borrowing costs upwards, which has also affected swap rates used by lenders for fixed-rate mortgages.
Five-year swap rates have risen above 4.5% this week, reaching their highest point since October 2023. Two-year swaps have also seen a sharp increase. These movements suggest that lenders may reprice mortgage products upwards in the coming days and weeks.
The average two-year fixed mortgage currently stands at 5.59%, with the average five-year fix at 5.63%. Experts anticipate a modest increase in mortgage rates if current movements persist, though others expect lenders to raise fixed rates if wholesale borrowing costs remain elevated.
Higher mortgage rates could create a more challenging environment for estate agents during the traditionally busier autumn selling season. This follows signs of weakening buyer activity, with July seeing the lowest monthly total of mortgage approvals for house purchase since January 2024.