Good morning. Today we're talking about rising mortgage rates, signs of grocery inflation cooling and banks under pressure to raise savings rates.

Big Stories

Mortgage rates hit 6%

Yesterday the average five-year fixed-rate home loan rose to 6.01%, edging closer to the 14-year peak reached at the end of 2022 when financial markets were thrown into turmoil following Liz Truss’ ill-fated ‘mini budget’. The new data from consumer finance site Moneyfacts also showed that the average two-year fixed rate mortgage has increased to 6.47%. With inflation proving stubborn and well above the 2% target, banks are anticipating further rate rises from the Bank of England. As a result mortgage rates have increased sharply and are now more than double what they were two years ago. The rate hikes are expected to increase repayment costs for the 2.4m households rolling off fixed deals between now and the end of 2024.

Signs of grocery relief

Sainsbury’s reported a 9.8% rise in sales in the last three months helped by an increase in the number of items sold, reversing a trend of shoppers cutting back. The UK’s second largest supermarket said that food inflation is starting to fall, after reaching a decades high level of 19% in April. However CEO Simon Roberts warned that food prices in the country will not return to where they were before Russia's invasion of Ukraine, as higher labour costs will continue to put upward pressure on prices.

Bank savings under pressure

The government has criticised banks for not passing on the full extent of interest rate rises to savers. The Treasury Select Committee said that easy-access savings rates of between 0.7% and 1.35% are "measly" at a time when the Bank of England base rate is 5%. The committee said that banks are "exploiting" savers' inertia by not offering higher interest rates and have summoned major high street banks to explain their actions. The government believes that passing on improved savings rates to consumers could help tackle inflation by taking money out of the system.

Elsewhere...

Walking out: Junior doctors have voted to extend strike action until at least January 2024.

Water issues: Thames Water have been fined more than £3m after admitting polluting rivers.

Staying put: Unilever has defended its decision to keep operating in Russia more than a year after the country invaded Ukraine.

Access denied: The private bank Coutts is understood to have shut Nigel Farage’s bank account after he fell below the prestigious lender’s wealth requirements.

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  Number Of The Day

5%

Proportion of privately rented properties in the UK are affordable to those on housing benefits, according to the Institute for Fiscal Studies.

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