Banks are likely to face increasing pressure to put up fixed mortgage rates after a sell-off in the government bond markets this week.

Analysts warn that the sharp rise in government bond yields, which have an inverse relationship with prices, will lead to higher mortgage rates on the high street.

Government bond yields on five-year gilts rose to 2.61 per cent yesterday – the highest level since 26 February6. Yields have risen from lows of 2.0% since the start of March.

The rise in yields forces banks and building societies to raise fixed rate mortgages as these are calculated by using swap rates, which tend to move in line with government bond yields.

Financial Times