The average five-year fixed mortgage rate has reached 6% for the first time in around three years, adding further pressure to borrowers as fixed-rate deals continue to become more expensive.
Moneyfacts reported that the average five-year residential mortgage rate stood at 6.00% on Monday morning, compared with 5.98% on Friday.
The rate is now at its highest level since 27 September 2023, when the average five-year deal reached 6.03%.
Two-year fixed mortgage rates are also approaching the 6% mark. The average two-year residential rate was 5.98% on Monday.
Fewer Mortgage Deals Below 5%
The rise in average rates has been accompanied by a sharp reduction in the number of fixed-rate mortgages available below 5%.
According to Moneyfactscompare.co.uk, the number of sub-5% fixed deals available to borrowers outside Northern Ireland fell from 1,494 at the beginning of September to just nine on Monday.
When deals available exclusively in Northern Ireland are included, there were 107 fixed-rate mortgages below 5%, compared with 1,691 at the start of September.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said lenders have been under pressure from increased volatility in swap rates, which are used to help determine the pricing of fixed mortgages.
She also pointed to rising gilt yields and higher wholesale funding costs as factors contributing to recent increases in mortgage pricing.
Mortgage Costs Put Pressure on Buyers
The latest increases could make affordability more challenging for prospective buyers, particularly as cheaper fixed-rate products become increasingly difficult to find.
Ian Harris, president of NAEA Propertymark, said buyers are highly sensitive to changes in mortgage rates. Even relatively small increases in monthly repayments could force some people to lower their budgets or delay buying altogether.
Homeowners reaching the end of cheaper fixed-rate deals could also face significantly higher monthly payments when they refinance.
Harris said this could influence some homeowners’ decisions about whether to move, while also making realistic property pricing and careful financial planning more important.
Borrowers Urged to Plan Ahead
Sarah Tucker, a mortgage expert at the HomeOwners Alliance, described the average five-year rate reaching 6% as a setback for borrowers, particularly those coming off much cheaper fixed deals.
However, she advised homeowners not to panic or simply wait for mortgage rates to fall.
Borrowers whose current mortgage deal is due to expire within the next six months could benefit from reviewing their options early.
With average fixed rates continuing to rise and sub-5% deals becoming increasingly scarce, buyers and existing homeowners may need to plan carefully to manage the impact of higher borrowing costs.
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