The average interest rate on a five-year fixed mortgage deal has reached 6% for the first time in three years, signaling a difficult period for prospective buyers and those looking to remortgage. This shift follows a significant reduction in affordable borrowing options, with the number of fixed-rate deals priced below 5% dropping by 99% since the beginning of September. Statistics from the financial information service Moneyfacts show that out of 1,494 deals available last month, only nine remain below that threshold. It means home buyers and anyone renewing a fixed deal have seen about 1,500 mortgage deals priced below 5% vanish since the start of September, according to the financial information service Moneyfacts. How much could my mortgage payments change. The information you provided on your monthly payments would not be sufficient to pay off your mortgage within the number of years given. This calculator does not constitute financial advice. It is based on a standard mortgage repayment formula dependent on the mortgage size and length and a fixed interest rate. Eligibility or availability of mortgage offers for users, it should be used as a guide only and does not represent the suitability. Users will need to approach an official mortgage lender, for exact figures.
The financial climate is increasingly described as “brutal” for borrowers. Average rates for two-year fixed mortgages have also climbed to 5.98%, marking the highest levels for both two-year and five-year products since late 2023. This upward trend is attributed to rising gilt yields, which have increased the wholesale funding costs for lenders. As government bond yields rise, it becomes more expensive for the state to borrow long-term, which exerts direct pressure on the mortgage market.
Major High Street lenders have responded to these market conditions with repeated rate hikes throughout September. Barclays has increased selected fixed rates on four separate occasions, while institutions including HSBC, Lloyds Bank, Nationwide, NatWest, Santander, and TSB have each implemented three rounds of increases. Rachel Springall, a finance expert at Moneyfacts, described the return to three-year highs as “disastrous news,” noting that borrowers who had anticipated a period of stabilization will likely be disappointed.
Springall suggested that rate increases were effectively inevitable given the current economic environment. For those reaching the end of their existing fixed-rate contracts, she advised seeking professional guidance to compare options carefully. Depending on the lender, some borrowers may be able to secure a new rate up to three or six months before their current deal expires. Alternatively, some are choosing to move toward variable rate mortgages, which track the Bank of England’s base rate and have remained relatively stable compared to fixed offerings.
The broader economic landscape remains strained, with uncertainty stemming from the ongoing conflict in Iran contributing to market volatility. While some had hoped for falling rates this year, global pressures have reversed those expectations. Bank of England forecasts indicate that over five million homeowners are likely to see their monthly mortgage repayments increase by the end of 2028.
These housing costs are arriving alongside broader inflationary pressures. On Friday, the RAC motoring group reported that the average cost of diesel in the UK surpassed £2 a litre for the first time. Meanwhile, domestic energy prices saw a 4% increase at the start of October, and analysts predict a further 16% hike when the regulator Ofgem updates the price cap in January. The government now faces significant pressure to provide support for households struggling with these rising essential bills during the upcoming Budget.
