A quick recap…

The cost of a two-year fixed-rate mortgage in the UK has risen above 6 per cent today for the first time this year, as thr turmoil in the property sector continued.

Average two-year fixed mortgage rates hit 6.01%, from 5.98% on Friday, financial data provider Moneyfacts reported.

The rise came as investors anticipate another increase in Bank of England base rate on Thursday, probably from 4.5% to 4.75%.

The financial markets now believe there is a greater than evens chance that UK interest rates hit 6% by early next year.

UK government borrowing costs continued to climb, with the two-year gilt yield hitting 5% for the first time since 2008. That will put further upward pressure on mortgage prices.

Increased borrowing costs have prompted some lender to withdraw deals, while other products have been repriced with higher interest rates in the last month.

Rising interest rates means people looking to remortgage their homes will pay an average £2,900 a year more from 2024, the Resolution Foundation think tank predicted.

But despite the squeeze, prime minister Rishi Sunak sounds unwilling to provide specific help for mortgage holders.

Speaking on ITV’s Good Morning Britain, Sunak said:

“I know the anxiety people will have about the mortgage rates, that is why the first priority I set out at the beginning of the year was to halve inflation because that is the best and most important way that we can keep costs and interest rates down for people.

Consumer champion Martin Lewis accused chancellor Jeremy Hunt, and UK banks and regulators, of missing the opportunity to agree protections for mortgage holders before rates surged.

Asking prices for British homes fell in June for the first time in six years, as rising interest rates hit the markets and dragged forward the usual summer slowdown.

But retail chain Next has lifted its profit forecasts, reporting that sales have been much stronger in recent weeks than expected. It attributed this increase to the better weather (more demand for summer clothes) and recent pay rises…

And in other news:

Former UK prime minister Liz Truss has been sharing some little gems of wisdom from her time in office.

Speaking at the European Broadcasting Union’s NewsXchange conference in Dublin today, Truss argued that the U.K. was, and still is, in “serious economic trouble”, Politico reports.

Truss, who left office after 45 days after her government’s mini-budget backfired, causing turmoil in the markets, said she needed to be “bold” to reverse declining economic growth.

She admitted she lacked support from Tory MPs and “could have gone a bit slower” with her economic reforms.

But Truss also criticised the UK media’s coverage of politics, saying:

“I do think sometimes politics is sort of treated as a branch of the entertainment industry, who’s up, who’s down, who says what about who.

“I think the level of understanding of economic ideas in the media and the ability to explain them is very poor indeed.”

The pound hit a record low in the aftermath of Truss’s mini-budget, as traders were concerned by the package of unfunded tax cuts announced by chancellor Kwasi Kwarteng.

UK bond yields jumped, but then recovered some ground after the Bank of England launched an emergency intervention last September.

Consumer finance champion Martin Lewis has criticised the government, and the financial sector, for not taking action sooner to protect mortgage-payers from rising interest rates.

In a post on Twitter, Lewis explains that he warned last autumn of a “mortgage ticking time bomb” as people’s existing fixed-rate deals came to an end.

Lewis says, a mortgage summit called last December by chancellor Jeremy Hunt proved to only be “a missed opportunity talking shop...”

Lewis says he pushed for “easy to agree forbearance and help measures” to assist those facing higher mortgage costs,

But, Lewis says, his push for real changes met push back from the banks, and sometimes from the FCA, the City regulator, too.

He writes:

For example 1. Any help options should be easily reversible on request. Eg if you extend your term, to reduce payments, when things improve you should have an automatic right to reduce the term. Knowing there is a reversibility option gets rid of a barrier to action - without reversibility people are scared to be locked into a longer mortgage (which means more interest).

2. It should have no or minimal impact on people’s credit scores (as it did in the pandemic). Again negative credit file impact is a big barrier to action - as it leaves people reticent to make a decision, which can lead to snowballing problems.

None of the suggestions have seen any real fruition. The attention faded, especially when rates didn’t rise as sharply as first expected.

Just in: High street retailer Next has just upgraded its profit forecasts for the year, and cited warmer weather and recent pay rises received by UK workers.

In an unscheduled trading update, Next says that trading in the last seven weeks has been “materially better” than the guidance it issued in May.

Full price sales in the first seven weeks of the second quarter were up +9.3% versus last year, strongly ahead of Next’s guidance of a 5% fall in full price sales.

In the period, Next have beaten its full price sales estimates by £93m.

It has now lifted its full year profit guidance by £40m to £835m.

Next tells shareholders that the recent change in weather (after a damp and windy spring) has boosted sales, saying:

The onset of warmer weather has made a significant difference to our performance, particularly coming after a wet and cold April.

Next also suspects that annual salary increases are spurring spending at its shops – a comment that may alarm the Bank of England as it tries to prevent inflation becoming embedded in the economy.

Next explains:

For example, during April annual inflation was running at 8.7% and monthly inflation was 1.2%; if an individual received a pay rise of 5.0%, then their real income would have risen by 3.8% in that month.

We do not think it is a coincidence that sales stepped forward so markedly at a time of year when many organisations make their annual pay awards.

Last week’s employment report showed that regular pay excluding bonuses increased by 7.2% in the three months to April, the fastest in 20 years.

Elsewhere in the City, the money markets are indicating a greater than 50% chance that UK interest rates will hit 6% by next February.

That’s up from just under 50% on Friday, Reuters reports.

This calculation is based on the price of interest rate swaps, which are derivatives contracts used by investors to hedge against rising borrowing costs, or to speculate on future moves in interest rates.

Renters are also feeling the squeeze from the cost of living crisis.

Bristol’s local mayor has warned today that tenants in his city are facing a “Wild West market”, and argued for rent controls in the housing market.

Marvin Rees told BBC Radio 4’s Today programme:

“There has been no real change in our regulatory powers as a local authority to keep up with the changing nature of the housing market. We are taking old tools to new challenges.”

On rent controls, Rees said:

“I recognise there is complexity but what we certainly need is intervention in the rental market.

“Whether you call that control or not is up to you, but there needs to be an intervention because allowing this Wild West of the rental market with rents growing out of all pace to people’s income…

“What we have at the moment in Bristol is, over the last decade, rents have gone up about 52% and wages have gone up 24%.

UK government short-term borrowing costs have hit a 15-year high, in a move that signals more pain for mortgage holders.

11am UPDATE: The yield, or interest, rates on two-year government bonds has just hit 5% 4.995% this morning. That’s the highest level since July 2008, just before the financial crisis erupted.

Those two-year gilts are used to price fixed-term mortgages. They are rising as the financial markets anticipate the Bank of England will raise UK interest rates on Thursday, for the 13th time in a row, to 4.75%.

Riz Malik, founder and director at R3 Mortgages, warns that rising mortgage rates are creating a ‘ticking time bomb’ in the UK property market:

We urgently needs a cross-party Mortgage Task Force to find potential solutions to this ticking time bomb.

This should be comprised of economists, lenders and other stakeholders who are actively involved in the mortgage market. We need action or the impending financial earthquake is going to send shockwaves across the country.

Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial, argues that the Bank of England should be given the leeway not to raise interest rates to squeeze inflation.

The Government need to change the mandate of the Bank of England so that they put more weight on the future of the economy and give their inflation target a longer term time horizon.

This would allow them to maintain their independence but take their foot off the accelerator when it comes to rate hikes. Confidence breeds confidence and a pause in rate rises will mean lenders stabilise their product offerings and the resultant competition drives prices downwards.

[the Bank’s target is to keep inflation at 2% – so is under pressure to keep raising interest rates as inflation was 8.7% in the year to April].

Newsflash: the average rate on a two-year fixed rate mortgage has risen over 6%, for the first time in six months.

Financial information provider Moneyfacts reports that the average two-year fixed rate has increased to 6.01% today.

That’s up from 5.98% on Friday, and 5.26% at the start of May. It takes average two-year fixed mortgage rates back towards the levels seen in the chaos after the mini-budget last autumn (when they hit 14-year highs).

This is the first time since the first week of December 2022 that two-year fixed-rate mortgages have cost 6% or more.

Longer-term fixed rate mortgages also become more expensive, with the average five-year fixed rate rising to 5.67% today, from 5.62% on Friday.

This reflects financial market expectations that the Bank of England will raise interest rates several times this year.

As well as a quarter-point hike on Thursday, to 4.75%, the money markets predict rates could hit 5.75% by the end of the year.

Mortgage providers continued to cut deals too.

The product count has fallen from 4,923 on Friday to 4,683 this morning, Moneyfacts adds.

Prime minister Rishi Sunak has ruled out providing any extra help for households who are struggling with mortgage payments.

Speaking on ITV’s Good Morning Britain, the prime minister declined to back extra support for mortgage holders, despite concerns that millions of households facing a dramatic rise in borrowing costs as they remortgages their home loans in coming months.

Instead, he said the government needs to “stick to the plan”, and that his top priority remains bringing inflation down.

Sunak said:

“I know the anxiety people will have about the mortgage rates, that is why the first priority I set out at the beginning of the year was to halve inflation because that is the best and most important way that we can keep costs and interest rates down for people.

“We’ve got a clear plan to do that, it is delivering, we need to stick to the plan.

“But there is also support available for people. We have the mortgage guarantee scheme for first-time buyers and we have the support for mortgage interest scheme which is there to help people as well.

On Friday, the Liberal Democrats called for a £3bn mortgage protection fund to be set up to offer help to families at risk of losing their homes, as fears of a jump in repossessions rose.

Mortgage experts fear the average rate on a two-year fixed-term mortgage could hit 6% today, having climbed to 5.98% at the end of last week.

But Sunak’s comments do square with the reports last night that Treasury insiders insisted that taxpayers will not bail out mortgage holders, as such state intervention would be the “most dangerous thing a government could do”.

Rightmove’s survey covers asking prices, not the actual amount which buyers agree to pay for a home.

Jeremy Leaf, north London estate agent, reports that sale prices are ‘softening’, saying:

‘As expected, recent mortgage market turbulence is dampening the increase in prices and activity which we would usually see at this time of year.

‘However, these are, of course, only aspirational not achieved values. On the street, prices are softening as cash and equity-rich buyers in particular continue to hold sway over those relying on increasingly hard-to-obtain loans.

‘Negative publicity is helping lower expectations and encourage more seller realism.’

Tom Bill, head of UK residential research at Knight Frank, says sentiment has ‘taken a hit” in the past few weeks:

“Recent rate volatility hasn’t yet had a material impact on housing market activity because, if anything, those holding mortgage offers are keen to move sooner rather than later. That said, sentiment has taken a hit in recent weeks, which will keep a lid on trading volumes later this year.

Ironically, strong wage inflation rather than the mini-Budget is now the main brake on the housing market although the outlook will only become clearer this week. Those buying, selling or re-mortgaging will hope the Bank of England isn’t faced with a second ugly underlying inflation reading on Wednesday.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Rising mortgage rates are cooling the UK housing market, bringing forward the usual summer slowdown in the housing market.

Asking prices for British homes fell in June for the first time in six years, property website Rightmove reports this morning.

Rightmove’s latest data shows that average new asking prices dipped, slightly, this month for the first time this year. It suggests that some sellers are pricing their properties a little more competitively, as higher borrowing costs dampen the market.

Average new seller asking prices slipped by £82 this month to £372,812. This is the first monthly drop in new asking prices this year, and the first at this time of year since 2017, Rightmove reports.

The number of sales being agreed has dropped marginally, and in the last two weeks is 6% behind the same period in 2019; twice as fast as the 3% drop recorded in May.

On average, over the previous ten years prices have risen by 0.6% at this time of year. Rightmove suggests that constraints on buyer affordability due to higher borrowing costs, and “more pricing realism from new sellers” have brought forward the usual summer slowdown.

Tim Bannister of Rightmove explains:

Average new seller asking prices, the first and leading indicator of new trends in the market, have dropped slightly this month, signalling that the belated spring price bounce has quickly turned into an earlier than usual summer slowdown.

We expect asking prices to edge down during the second half of the year which is the normal seasonal pattern, and while we sometimes re-forecast our expectations for annual price changes at this time, current trends suggest that our original forecast of a 2% annual drop in asking prices at the end of 2023 is still valid.

The squeeze on borrowers is expected to worsen this week, with the Bank of England expected to raise interest rates on Thursday from 4.5% to 4.75%.

One Conservative MP warned last weekend that Britain is heading for a “mortgage catastrophe”, due to the surge in borrowing costs this year.

Lucy Allan, the Tory MP for Telford, said:

“I don’t think we have quite understood the interest rate catastrophe.

People [are] telling me their monthly mortgage payment is exceeding their salary. That is unsustainable.

“Constituents do ask about ‘support for unaffordable mortgages’. I say ‘talk to your lender,’ but the reality is they need to sell sooner rather than later and that’s a hard message to hear.”

Allies of chancellor Jeremy Hunt have ruled out giving any direct fiscal support to households struggling with soaring mortgage costs.

Hunt, according to Treasury sources, has concluded that such an intervention would drive up government borrowing and fuel inflationary pressure, leading to even higher interest rates.

More than a quarter of UK homeowners on a fixed-rate mortgage are heading for sharp increase in monthly payments before the next election.

Figures shared with the Guardian by UK Finance, the banking industry trade body, show more than 2.4m fixed-rate homeowner deals will expire between now and the end of 2024.

According to the Resolution Foundation, total annual mortgage repayments are now on course to rise by £15.8 billion by 2026, as households move onto new, higher fixed-rate deals.

That means an extra £2,900 cost for the average household re-mortgaging next year.

The agenda

• All day: Paris Air Show

• 9am BST: ECB Survey of Monetary Analysts

• 3pm BST: NAHB/Wells Fargo index of US housing market