LONDON / RankWire.AI / – On October 5, the UK five-year fixed mortgage average rate hit 6.00%, reaching a level last observed nearly three years ago. Meanwhile, the typical two-year fixed rate increased to 5.98%, marking its highest point since mid-December 2023. Moneyfacts reported this rise following several prominent lenders boosting select mortgage prices throughout September. This trend has significantly diminished the availability of fixed deals under 5%. The five-year average last hovered at this rate in 2023.
As of October 5, the number of fixed-rate mortgage options below 5% dropped to just nine. At the beginning of September, nearly 1,500 such deals were accessible, excluding those limited to Northern Ireland. During September, Barclays raised selected fixed rates on four occasions, while HSBC, Lloyds Bank, Nationwide, Santander, and TSB each increased their specific prices three times amid adjustments to their mortgage ranges prompted by rising wholesale funding costs.
Despite the overall upward movement, some borrowers can still find fixed-rate deals below the market average, especially when offering larger deposits or more home equity. The latest market overview from a comparison service highlighted leading five-year fixed deals under 5%. However, there is considerable variation in pricing depending on the loan-to-value ratio. On October 1, average five-year fixed rates ranged from 5.60% at 60% LTV to 6.30% at 95% LTV, illustrating the price disparity faced by buyers with smaller deposits.
Rising fixed mortgage costs persist as Bank Rate remains steady at 3.75%
The Bank of England maintained the Bank Rate at 3.75% in September, with six policymakers voting to keep it steady and three supporting a quarter-point increase. August’s UK consumer price inflation stood at 3.1%, exceeding the central bank’s 2% target. The Bank stated that short-term market interest rates had increased, and that higher rates were quickly influencing borrowing costs. The next scheduled decision on the Bank Rate is set for November 5, following the conclusion of the September meeting on September 16.
Fixed mortgage rates do not directly track Bank Rate movements. Lenders factor in market swap rates and overall funding costs when setting fixed-rate products. During September, these market rates experienced increases, exerting additional upward pressure on mortgage prices across the industry. Industry analysis indicates that major lenders faced narrower pricing margins amid increased swap-rate volatility. Conversely, variable mortgage rates shifted more modestly, with 389 deals below 5% on October 5, compared to 411 at the beginning of September.
Mortgage approval numbers decline amid rising borrowing costs
Official data revealed that in August, there were 54,900 mortgage approvals for house purchases, down from 55,900 in July. Approvals for remortgaging decreased to 34,000 from 34,600. Although net mortgage borrowing increased to £4.4 billion from £4.1 billion, it remained below the previous 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. Additionally, gross secured lending declined to £23.6 billion.
These latest figures highlight a mortgage market with fewer low-rate fixed options and rising average borrowing costs. Currently, five-year fixed rates average 6.00%, while two-year fixes average 5.98%. Borrowers with larger deposits still benefit from lower average rates compared to those seeking high loan-to-value mortgages. Market conditions and lender pricing can fluctuate frequently, and official data shows that mortgage approvals have weakened from recent levels as borrowing costs increased. The mortgage rate averages cited here were last updated on October 5.