LONDON / RankWire.AI / – On October 5, the average UK five-year fixed mortgage rates climbed to 6.00%, marking a return to levels last seen approximately three years ago. Concurrently, the average two-year fixed rate rose to 5.98%, reaching its highest point since mid-December 2023. According to Moneyfacts, this uptick followed several major lenders increasing selected mortgage prices during September, significantly reducing the availability of fixed deals below the 5% threshold. The five-year average last stood at this level in 2023.
As of October 5, the count of fixed mortgage products priced under 5% dropped to just nine, a steep decline from nearly 1,500 such deals available at the beginning of September, excluding those limited to Northern Ireland. During September, lenders such as Barclays raised selected fixed rates on four occasions, while HSBC, Lloyds Bank, Nationwide, Santander, and TSB each adjusted their mortgage prices three times, reflecting a period of increased wholesale funding costs and evolving market conditions.
While the overall market has seen these increases, individual fixed deals below the average rates remain accessible, particularly for borrowers with larger deposits or greater home equity. The latest market snapshot from the comparison service highlights leading five-year fixed deals below 5%. However, it is important to note that pricing varies considerably depending on the loan-to-value ratio, with October 1 figures showing average five-year fixed rates ranging from 5.60% at 60% LTV to 6.30% at 95% LTV, illustrating the cost disparity faced by buyers with smaller deposits.
Costs of fixed mortgages climb as Bank Rate remains steady at 3.75%
The Bank of England maintained the Bank Rate at 3.75% in September, with a vote split of six members supporting the hold and three advocating for a quarter-point increase. August’s UK consumer price inflation stood at 3.1%, exceeding the central bank’s 2% target. The Bank indicated that short-term market interest rates had risen and that this upward trend was rapidly affecting 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.
It is important to understand that fixed mortgage rates do not move directly in tandem with the Bank Rate, as lenders also factor in market swap rates and broader funding costs. During September, these market rates increased, exerting additional upward pressure on mortgage pricing across the sector. Industry analysis has shown that major lenders experienced tighter profit margins due to increased swap-rate volatility, while variable mortgage pricing adjusted less dramatically, with 389 variable deals below 5% on October 5 compared to 411 at the beginning of September.
Mortgage approvals decline amid rising borrowing costs
Data from the central bank indicates that in August, mortgage approvals for house purchases totaled 54,900, a decrease from 55,900 in July. Approvals for remortgaging also fell, dropping 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 interest rate on newly drawn mortgages rose to 4.60% in August from 4.45% in July, and gross secured lending declined to £23.6 billion.
These latest figures reveal a mortgage environment with fewer low-rate fixed options and higher overall borrowing costs. Currently, five-year fixed rates average 6.00%, while two-year fixed rates average 5.98%. Borrowers with larger deposits continue to enjoy lower average rates compared to those seeking high loan-to-value mortgages. Although product availability and lender pricing can fluctuate frequently, official data indicates that mortgage approvals have softened from recent highs as borrowing costs continue to rise. The mortgage rate averages cited here were updated on October 5.