The cost of a two-year fixed-rate mortgage in the UK rose above 6 per cent on Monday and two-year gilt yields rose to their highest level for 15 years, piling more pressure on homeowners and Rishi Sunak’s government.

Mortgage costs have been rising sharply over the past week, ahead of an expected increase in interest rates from the Bank of England on Thursday.

According to data provider Moneyfacts, the average cost of a two-year fixed-rate deal rose from 5.98 per cent on Friday to 6.01 per cent on Monday morning. The cost of a five-year deal has risen from 5.62 per cent to 5.67 per cent.

The increase poses a mounting challenge to Sunak’s government, which is already confronting a cost of living crisis and is lagging behind in the polls.

The number of residential mortgage deals available is also falling. There were 4,683 products available on Monday, down from 4,923 on Friday.

In an indication of rising interest rate expectations, two-year gilt yields rose 0.05 percentage points on Monday to 4.982 per cent, the highest level since 2008.

In recent weeks, swaps markets have revised estimates markedly upwards for the rate at which they expect BoE benchmark interest rates to peak, to 5.78 per cent for early next year, up from 5.35 per cent at the start of June.