LONDON / RankWire.AI / – UK mortgage costs increased again in early October as the average five-year fixed rates hit 6.00%, marking their highest point since September 2023. The average two-year fixed rates also climbed to 5.98%, reaching their peak since December 2023. Moneyfacts documented this rise following a series of lender repricing actions taken during September. Consequently, there are now significantly fewer fixed-rate products available below 5%. The market has experienced rapid changes in mortgage pricing in recent weeks.
By October 5, the number of fixed mortgage deals below 5% dropped to just nine. At the start of September, nearly 1,500 such products were accessible, excluding offers confined to Northern Ireland. Throughout September, several major lenders repeatedly increased selected fixed rates. Barclays adjusted some prices four times, while HSBC, Lloyds Bank, Nationwide, Santander, and TSB each raised certain rates three times. These adjustments have narrowed the range of affordable fixed mortgages for homebuyers and those refinancing their existing loans.
Despite these changes, borrowers can still find rates below the market average in specific segments of the mortgage market. Generally, larger deposits and lower loan-to-value ratios enable access to more competitively priced deals. As of October 1, the average five-year fixed rate for 60% loan-to-value borrowers stood at 5.60%, while for mortgages at 95% loan-to-value, it increased to 6.30%. This difference highlights how deposit size continues to influence borrowing costs. Moneyfacts has also listed some prominent five-year fixed-rate products below 5%.
Bank Rate remains steady while fixed mortgage rates climb
Bank of England maintained the Bank Rate at 3.75% during its September policy meeting. Out of six members, four voted to hold rates steady, with three supporting a quarter-point increase. In August, UK consumer price inflation was recorded at 3.1%, still above the central bank’s 2% target. The Bank of England noted that short-term market interest rates had risen during this period and indicated that these higher rates were increasingly impacting borrowing costs for households and businesses.
Fixed mortgage rates do not follow Bank Rate solely, as lenders also factor in swap rates and other wholesale funding costs when determining their pricing. These market indicators moved upward during September, which affected fixed mortgage offers. In contrast, variable-rate products saw a smaller reduction in deals below 5%, with 389 variable deals under that level available on October 5, compared to 411 at the start of September. The latest figures reveal a broader gap between fixed and variable pricing conditions.
Household borrowing slows amid rising costs, mortgage approvals decline
Official lending data for August suggests a slowdown in UK housing market activity. Mortgage approvals for home purchases fell to 54,900 from 55,900 in July, while remortgage approvals decreased to 34,000 from 34,600. Despite an increase in net mortgage borrowing to £4.4 billion from £4.1 billion, it remained below the previous six-month average of £5.2 billion. The interest rate on new mortgages rose to 4.60% from 4.45% in July, with gross secured lending dropping to £23.6 billion.
This latest data shows that borrowers now face higher average fixed rates and a smaller pool of low-cost deals. Currently, five-year fixed mortgages average 6.00%, and two-year products average 5.98%. Borrowers with larger deposits continue to benefit from lower average rates compared to those with smaller deposits. As borrowing costs increase, mortgage approvals have also decreased from recent levels. Lenders frequently adjust product prices based on funding conditions, resulting in a market that now features higher fixed-rate averages and a much reduced selection of deals below 5%.