- Average five-year fixed mortgage rate reaches 6 per cent, the highest since September 2023.
- Only nine fixed-rate deals below 5 per cent remain, down from 1,494 at the start of September.
- Rising gilt yields and volatile swap rates are pushing up lenders’ funding costs.
UK mortgage rates have climbed back to a three-year high, with the average five-year fixed mortgage rate reaching 6.00 per cent as almost all fixed-rate deals below 5 per cent disappear from the market.
Moneyfacts said the average five-year fixed rate reached 6 per cent on October 5, its highest level since September 27, 2023, when it stood at 6.03 per cent. The average two-year fixed rate has also risen to 5.98 per cent, its highest level since December 2023.
The bigger shock for borrowers is the disappearance of cheaper deals. There were 1,494 fixed-rate mortgage products below 5 per cent at the start of September. By October 5, only nine remained, excluding deals available exclusively in Northern Ireland.
That represents a 99 per cent fall in the number of sub-5 per cent fixed deals available to borrowers. Including Northern Ireland-only products, the number has dropped from 1,691 to 107.
Moneyfacts finance expert Rachel Springall described the impact on cheaper fixed mortgages as “brutal”, saying around 1,500 deals priced below 5 per cent had disappeared since the start of September.
Why are UK mortgage rates rising?
The latest increase is not simply a story about the Bank of England changing its base rate.
Fixed mortgage rates are heavily influenced by swap rates, which reflect the cost to lenders of securing funding for a fixed period. Those rates have been pushed higher by volatility in financial markets and rising yields on UK government bonds, known as gilts.
The UK 30-year gilt yield rose above 6 per cent on October 1 for the first time since 1998, while the 10-year gilt yield reached its highest level since 2007. Investors have been reassessing the outlook for inflation and interest rates amid the economic effects of the Iran war, higher energy costs and wider global bond-market turbulence.
Springall said, “The past few weeks have seen pricing margins among major lenders come under immediate pressure from renewed swap rate volatility. As wholesale funding costs climb on the back of rising gilt yields, fixed rate adjustments are somewhat inevitable.”
That pressure has already been visible among the biggest lenders. Barclays increased selected fixed rates four times during September, while HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB each made three rounds of increases.
The speed of the change matters. Borrowers who had been expecting fixed rates to continue easing are now facing a very different market.
What does the 6 per cent mortgage rate mean for borrowers?
The 6 per cent figure is an average across mortgage products, rather than a rate every borrower will be offered.
The actual rate available to a homeowner or buyer depends on factors including the size of the deposit or equity in the property, loan-to-value ratio, income, credit history, property type and the mortgage fee.
That means some borrowers can still find rates below the market average. But the collapse in the number of sub-5 per cent fixed deals shows that the cheapest end of the market has become much harder to access.
The contrast with variable-rate mortgages is also notable. Moneyfacts said the number of sub-5 per cent variable-rate deals, excluding Northern Ireland-only products, fell only from 411 to 389 during the same period.
For homeowners coming to the end of a fixed-rate deal, the timing could therefore be particularly important.
Springall said borrowers should seek advice and compare deals carefully, noting that some lenders allow customers to secure a new rate several months before their existing mortgage ends.
For the wider housing market, higher mortgage costs could put further pressure on demand. UK house-price growth was already subdued in September, with Nationwide reporting annual growth of just 0.8 per cent and a 0.2 per cent monthly fall. The lender linked weaker activity partly to uncertainty and higher borrowing costs.
The key question now is whether the latest jump in fixed mortgage rates proves temporary or becomes a more lasting feature of the UK housing market.
For borrowers, however, the immediate change is already clear: the era of abundant sub-5 per cent fixed mortgage deals has almost disappeared.
