LONDON / RankWire.AI / – On October 5, the UK five-year fixed mortgage average rate hit 6.00%, reaching levels not seen in roughly three years. Meanwhile, the typical two-year fixed rate increased to 5.98%, its highest point since mid-December 2023. This rise was noted by Moneyfacts following several leading lenders raising specific mortgage prices during September. As a result, the number of fixed deals available below the 5% threshold has sharply declined. The five-year average had last been at this level in 2023.
The count of fixed mortgage products priced under 5% dropped to just nine on October 5. At the beginning of September, there were nearly 1,500 such deals, excluding those limited to Northern Ireland. In September, Barclays raised certain fixed rates four times. HSBC, Lloyds Bank, Nationwide, Santander, and TSB each increased selected prices three times amid wider adjustments to mortgage ranges driven by rising wholesale funding costs.
While most borrowers face higher rates, some can still access individual fixed deals below market averages, particularly with larger deposits or more equity in their homes. The latest market overview from a comparison service listed leading five-year fixed deals below 5%. However, prices vary significantly depending on the loan-to-value ratio. On October 1, the average five-year fixed rate ranged from 5.60% at 60% LTV to 6.30% at 95% LTV, illustrating the gap faced by buyers with smaller deposits.
Cost of fixed mortgages increases as Bank Rate remains at 3.75%
Bank of England kept the Bank Rate steady at 3.75% in September, with six policymakers voting to maintain the rate and three supporting a quarter-point hike. August’s consumer price inflation in the UK was 3.1%, exceeding the bank’s 2% target. The Bank indicated that short-term market interest rates have risen, with higher rates quickly passing through to borrowing costs. The next scheduled Bank Rate decision is set for November 5, following the September 16 meeting ending date.
Fixed mortgage prices do not change directly with Bank Rate alone; lenders also consider market swap rates and broader funding costs. During September, these rates increased, exerting upward pressure on mortgage prices sector-wide. Industry analysis shows that major lenders faced tighter margins due to increased swap-rate volatility. Variable-rate mortgages saw less movement, with 389 deals below 5% on October 5 compared to 411 at the start of September.
Mortgage approvals decline amid rising borrowing costs
Official data indicate that 54,900 mortgage approvals for home purchases occurred in August, down from 55,900 in July. Remortgaging approvals also decreased, falling to 34,000 from 34,600. Despite an increase in net mortgage borrowing to £4.4 billion from £4.1 billion, this remains below the six-month average of £5.2 billion. The average interest rate on newly drawn mortgages rose to 4.60% in August from 4.45% in July. Gross secured lending also declined, reaching £23.6 billion.
The latest figures highlight a mortgage market with fewer low-rate fixed options and higher borrowing costs overall. Currently, five-year fixed rates average 6.00%, while two-year fixes average 5.98%. Borrowers with larger deposits continue to benefit from lower rates compared to those applying for high loan-to-value mortgages. Market conditions and lender pricing are subject to frequent change, and official data show a weakening in mortgage approvals as borrowing costs increase. The averages reported here were updated on October 5.