According to data from the Bank of England, the average cost of a two-year fixed-rate mortgage with a 5% deposit was 3.95 %in September, an increase from 3.02% in March. The cost of loans is higher than at any time since June 2018.

This week, Boris Johnson promised to turn “generation rent into generation buy” and pledged to create two million new homeowners by offering long-term fixed-rate mortgages worth up to 95% of a property’s value, The Times reports.

The UK Government has revealed few details about the plans, but there are suggestions that it could accept some of the risk through a form of state guarantee. Industry experts raised concerns that the mortgages could be subject to high interest rates that would render them unattractive.

Simon Gammon, managing partner at Knight Frank Finance, said that the latest Bank of England figures would “make for alarming reading” for first-time buyers and the government. Lenders have become more cautious during the pandemic, despite interest rates being slashed to 0.1%.

“The manner in which the property market has burst back to life since the lockdown means there’s plenty of business to go around at those lower LTVs, so raising rates at the other end of the market effectively stems the flow of new applications to a more manageable level.”

UK house prices have reached record highs during the COVID-19 outbreak as the market has been boosted by the release of pent-up demand and a temporary cut to stamp duty. UK mortgage approvals measured by the Bank of England hit a 13-year high in August.