Poor inflation judgment by the Bank of England has pushed interest rates to soaring levels for a second day running, suppressing any hopes of looming cut in new mortgage rates.

Three-month sterling Libor, the benchmark rate used to price many loans, soared by 0.04 percentage points to 5.84 per cent, bringing the rise to 0.08 percentage points in just two days and wiping out most of the improvement of the previous three weeks.

Moneyfacts say the average rate for a two-year loan reached 6.64 per cent Thursday, the highest rate since 2000.

Two-year swap rates, a key benchmark for fixed-rate mortgages, have leapt from 5.27 per cent to 5.63 per cent in the space of a week. However, Moneyfacts says that despite what was happening in the market, the fixed-rate mortgages would rise again.

Darren Cook, of Moneyfacts, said: “We’ll see a bit of a lag and then fixed-rate mortgage rates are going to go up again.”

Homebuyers and borrowers looking to remortgage had already been warned to brace themselves for the worst mortgage terms because of the shift in expectations about base rate over the next year.

Latest reports suggest that UK’s biggest banks are now preparing to swap as much as £90 billion of mortgage-backed assets for Treasury bills with the Bank.