LONDON / RankWire.AI / – UK mortgage expenses saw another rise in early October, with the average five-year fixed rate reaching 6.00%. This marks the highest point since September 2023. Similarly, two-year fixed rates climbed to 5.98%, the highest since December 2023. Moneyfacts reported the escalation following a series of lender re-pricing actions throughout September. As a result, borrowers now face a significantly reduced selection of fixed-rate options below 5%. Recently, mortgage pricing has shifted rapidly across the sector over the past few weeks.
By October 5, the number of fixed mortgage products available under 5% had dropped to just nine. At the beginning of September, nearly 1,500 such deals were accessible, excluding offers limited to Northern Ireland. During September, several major lenders increased their fixed rates multiple times; Barclays altered 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 low-cost fixed mortgages accessible to homebuyers and those refinancing existing loans.
Despite these changes, some parts of the mortgage market still offer rates below the average. Typically, larger deposits and lower loan-to-value ratios allow borrowers to secure more affordable rates. On October 1, the average five-year fixed rate for those at 60% loan-to-value was 5.60%, whereas it rose to 6.30% at 95% loan-to-value. This disparity highlights how deposit size continues to influence borrowing costs. Moneyfacts has also listed several leading five-year fixed options below 5%.
Bank Rate remains steady while fixed mortgage prices climb
Bank of England maintained the Bank Rate at 3.75% during its September policy meeting. Out of six members, five voted to keep rates unchanged, while three supported a quarter-point hike. August saw UK consumer price inflation at 3.1%, still above the bank’s 2% target. The Bank of England noted that short-term market interest rates had increased during this period and indicated that higher market rates are impacting borrowing costs for households and businesses.
Fixed mortgage rates are not solely driven by the Bank Rate. Lenders also factor in swap rates and other wholesale funding expenses when setting their prices. During September, these market measures increased, influencing fixed mortgage offerings. In contrast, variable-rate products experienced a smaller decrease in availability below 5%, with 389 such deals remaining on October 5 compared to 411 at the start of September. These figures illustrate a growing gap between fixed and variable borrowing conditions.
Household borrowing activity softens as borrowing costs rise
Official lending data for August suggest a slowdown in the UK housing market. Mortgage approvals for house purchases fell to 54,900 from 55,900 in July, and remortgage approvals decreased to 34,000 from 34,600. Meanwhile, net mortgage borrowing increased to £4.4 billion from £4.1 billion, although this remains below the six-month average of £5.2 billion. The interest rate on new mortgages rose to 4.60% from 4.45% in July. Gross secured lending declined to £23.6 billion.
These latest figures indicate higher average fixed mortgage rates and a smaller pool of low-cost deals. Currently, five-year fixed mortgages average 6.00%, with two-year deals at 5.98%. Borrowers with larger deposits continue to benefit from lower average rates than those with smaller deposits. Additionally, as borrowing costs have increased, mortgage approvals have declined from recent highs. Lenders frequently adjust product prices based on market conditions, leading to a market environment where higher fixed rates coexist with a limited number of deals below 5%.
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