LONDON / RankWire.AI / – UK mortgage costs rose again in early October as average five-year fixed rates reached 6.00%. That marked their highest level since September 2023. Average two-year fixed rates also climbed to 5.98%, the highest since December 2023. Moneyfacts recorded the increase after a series of lender repricing moves during September. The rise has left borrowers with far fewer fixed-rate products below 5%. Mortgage pricing has changed quickly across the market during recent weeks.
By October 5, the number of fixed mortgage deals available below 5% dropped to just nine. At the start of September, nearly 1,500 such products were on offer, excluding options limited to Northern Ireland. During September, several major lenders increased selected fixed rates multiple times. Barclays altered some prices four times, while HSBC, Lloyds Bank, Nationwide, Santander, and TSB each raised their fixed rates three times. These adjustments reduced the variety of lower-cost fixed mortgages accessible to homebuyers and those refinancing existing loans.
Although the overall market has seen a decline, some segments still offer rates below the average. Generally, larger deposits and lower loan-to-value ratios enable access to more affordable borrowing options. As of October 1, the average five-year fixed rate for borrowers at 60% loan-to-value was 5.60%. In contrast, for those at 95% loan-to-value, the average increased to 6.30%. This gap illustrates how deposit size continues to influence borrowing expenses. Moneyfacts also highlighted some prominent five-year fixed-rate products 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 decision. Six members voted to keep rates unchanged, with three supporting a quarter-point increase. UK inflation, measured at 3.1% in August, stayed above the bank’s 2% target. The Bank of England noted that short-term market interest rates had risen over the period, and that these higher rates were beginning to affect borrowing costs for households and businesses.
Fixed mortgage rates are influenced by more than just Bank Rate. Lenders also consider swap rates and other wholesale funding costs when setting their prices. These market indicators moved upward during September, impacting fixed mortgage offerings. Meanwhile, variable-rate products experienced a smaller reduction in deals below 5%. On October 5, there were 389 variable deals under that threshold, down from 411 at the start of September. This widening gap highlights the divergence between fixed and variable rate conditions.
Household borrowing slows amid rising mortgage costs
Official lending data from the UK pointed to a slowdown in housing market activity during August. Mortgage approvals for house purchases decreased to 54,900 from 55,900 in July, while remortgage approvals fell to 34,000 from 34,600. Net mortgage borrowing increased slightly to £4.4 billion from £4.1 billion but remained below the six-month average of £5.2 billion. The average interest rate on new mortgages also rose to 4.60% from 4.45% in July. Gross secured lending decreased to £23.6 billion.
Recent mortgage figures show borrowers are now facing higher fixed rates and fewer low-cost deals. The current five-year fixed average stands at 6.00%, while two-year products average 5.98%. Borrowers with larger deposits continue to benefit from lower average rates than those with smaller deposits. Additionally, mortgage approvals have declined from recent peaks as borrowing costs have increased. As market conditions shift, lenders frequently adjust product prices, resulting in a current landscape characterized by higher fixed-rate averages and a significantly reduced pool of deals priced below 5%.