Key facts
- Average five-year fixed mortgage rate in the UK is 6.00%.
- Average two-year fixed mortgage rate in the UK is 5.98%.
- Number of mortgage deals below 5% has dropped to nine.
- Monthly cost of a £250,000 loan at 6% is £158 higher than at 4.94%.
The average cost of a five-year fixed-rate mortgage in the UK has climbed to 6%, a level not seen in three years, as market jitters increase borrowing costs for lenders. Data from Moneyfacts shows the average five-year fixed rate is now 6.00%, while the average two-year fixed rate is at 5.98%.
These increases come amid turmoil in global bond markets, which has fueled expectations of a base rate rise. Consequently, the availability of fixed-rate mortgages priced below 5% has drastically shrunk to just nine options, a 99% decrease from the previous month. This situation is described as "brutal" by Rachel Springall, a finance expert at Moneyfacts, who noted that borrowers hoping for rate stabilization will be disappointed.
The rising prices present a significant challenge for borrowers whose current fixed-rate deals are ending, as well as for those looking to purchase a property. The HomeOwners Alliance calculated that a £250,000 loan fixed at 6% for five years would cost £158 more per month compared to a loan at 4.94%, the average rate at the start of February.
These higher mortgage costs are already impacting the housing market. Nationwide reported that annual house price growth had halved in September. Ian Harris, president of NAEA Propertymark, stated that estate agents are observing buyers' sensitivity to mortgage rates, and the scarcity of sub-5% deals is further pressuring affordability. He added that some buyers may need to reduce their budgets or withdraw from purchases, while homeowners remortgaging could face substantially higher repayments, potentially affecting their decision to move.