The average interest rate on five-year fixed mortgages has reached 6% for the first time in three years, according to figures cited by the financial information service Moneyfacts. The milestone reflects a sharp tightening in the mortgage market over recent weeks.
Lenders have raised rates repeatedly as their wholesale funding costs have climbed. Rising yields on government bonds mean the UK government now pays more to borrow long-term, a cost that feeds directly into mortgage pricing. Major High Street lenders made multiple rate increases in September. Barclays raised selected fixed rates four times, while HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB each increased rates three times.
The market has contracted dramatically. The number of fixed-rate deals priced below 5% plunged by 99%, from 1,494 at the start of September to nine now, according to Moneyfacts. The average rate on two-year fixed mortgages stands at 5.98%, the highest since December 2023.
Rachel Springall, finance expert at Moneyfacts, described the situation as "disastrous" for borrowers. "Borrowers who were hoping mortgage rates would stabilise will be disappointed," she said. She advised those coming to the end of fixed deals to "seek advice and compare deals carefully." Some lenders allow borrowers to lock in a rate three to six months before their current deal expires.
Global economic uncertainty, particularly the Iran war, has pushed up borrowing costs internationally. Many borrowers had expected rates to fall this year owing to improved economic conditions, but those expectations have been upended.
The timing creates pressure for millions of homeowners. About 5.1 million homeowners should expect their monthly repayments to increase by the end of 2028, according to Bank of England forecasts. Homebuyers and those renewing deals face far fewer affordable options. Variable-rate mortgages priced below 5% have remained relatively stable, leading some borrowers to consider deals that track the Bank of England's base rate instead.