LONDON / RankWire.AI / – Average UK five-year fixed mortgage rates reached 6.00% on October 5, returning to levels last seen about three years ago. The average two-year fixed rate rose to 5.98%, its highest since mid-December 2023. Moneyfacts recorded the increase after several major lenders raised selected mortgage prices during September. The move has sharply reduced the number of fixed deals available below the 5% mark. The five-year average last stood at this level in 2023.
The number of fixed mortgage products priced below 5% fell to nine on October 5. There were nearly 1,500 such deals at the start of September, excluding products limited to Northern Ireland. Barclays increased selected fixed rates four times during September. HSBC, Lloyds Bank, Nationwide, Santander and TSB each raised selected prices three times as lenders adjusted mortgage ranges during a period of higher wholesale funding costs.
Borrowers can still find individual fixed deals below the market averages, especially with larger deposits or more home equity. The comparison service listed leading five-year fixed deals below 5% in its latest market snapshot. However, average pricing varies widely by loan-to-value ratio. On October 1, average five-year fixed rates ranged from 5.60% at 60% loan-to-value to 6.30% at 95% loan-to-value, showing the price gap facing buyers with smaller deposits.
Fixed mortgage costs rise as Bank Rate stays at 3.75%
The Bank of England kept Bank Rate at 3.75% in September, with six policymakers voting to hold and three supporting a quarter-point increase. UK consumer price inflation stood at 3.1% in August, above the central bank’s 2% target. The Bank said short-term market interest rates had risen and that higher rates were passing through quickly to borrowing costs. Its next scheduled Bank Rate decision is due on November 5. The committee’s September meeting ended on September 16.
Fixed mortgage pricing does not move directly with Bank Rate alone. Lenders also use market swap rates and broader funding costs when setting fixed-rate products. Those market rates increased during September, adding pressure to mortgage pricing across the sector. Industry analysis found that major lenders faced tighter pricing margins as swap-rate volatility increased. Variable mortgage pricing changed less sharply, with 389 variable deals below 5% on October 5, compared with 411 at the start of September.
Mortgage approvals fall as borrowing rates increase
Central bank data showed 54,900 mortgage approvals for house purchases in August, down from 55,900 in July. Approvals for remortgaging fell to 34,000 from 34,600. Net mortgage borrowing rose to £4.4 billion from £4.1 billion, but remained below the previous six-month average of £5.2 billion. The effective interest rate on newly drawn mortgages increased to 4.60% in August from 4.45% in July. Gross secured lending also fell to £23.6 billion.
The latest figures show a mortgage market with fewer low-rate fixed products and higher average borrowing costs. Five-year fixed rates now average 6.00%, while two-year fixes average 5.98%. Borrowers with larger deposits continue to have access to lower average rates than those seeking high loan-to-value mortgages. Product availability and lender pricing can change frequently, while official data show mortgage approvals have weakened from recent levels as borrowing costs increased. The mortgage averages used here were updated on October 5.