Mortgage borrowers face higher costs as the number of cheaper fixed-rate deals on the market has plunged in just over a month. The average five-year fixed residential mortgage rate reached 6.00 per cent on Monday, according to financial information website Moneyfactscompare.co.uk, up from 5.98 per cent on Friday.
This is the first time the average five-year rate has reached 6 per cent in three years. The last time it was higher was on September 27, 2023, when it stood at 6.03 per cent. The average two-year fixed homeowner mortgage rate is also approaching the same level, standing at 5.98 per cent on Monday morning.
Sub-5% deals vanish
Borrowers searching for the cheapest deals have seen an even more dramatic change in recent weeks. Moneyfacts said the number of fixed-rate mortgage deals priced below 5 per cent has fallen from 1,494 at the start of September to just nine. The figures exclude products exclusively available to borrowers in Northern Ireland.
When Northern Ireland-only products are included, there are 107 fixed-rate deals below 5 per cent, compared with 1,691 at the beginning of September. Mortgage rates have been edging upwards amid increases in swap rates, which lenders use when pricing their fixed-rate products.
Lenders under pressure
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “The past few weeks have seen pricing margins among major lenders come under immediate pressure from renewed swap rate volatility.
“As wholesale funding costs climb on the back of rising gilt yields, fixed rate adjustments are somewhat inevitable.
“The impact on sub-5% fixed mortgages has been brutal, with around 1,500 deals priced below 5% vanishing since the start of September while average five-year fixed rate has reached 6 per cent, with the average two year not far behind.
“Average fixed mortgage rates have not been above 6 per cent for around three years.”
Impact on buyers and homeowners
The rise will be particularly important for homeowners approaching the end of an existing fixed-rate mortgage, as well as people preparing to buy a property. Ian Harris, president of NAEA (National Association of Estate Agents) Propertymark, said: “We are seeing first hand how sensitive buyers are to mortgage rates, and the rapid disappearance of sub-5 per cent deals will inevitably add further pressure to affordability.
“For some buyers, even a relatively small increase in monthly repayments can mean they have to reduce their budget or step back from a purchase altogether.
“Equally, homeowners coming off fixed-rate deals may face significantly higher repayments, which could affect their decision to move.”
Borrowers whose current mortgage deal is approaching its end have also been urged not to wait for rates to fall before considering their options. Sarah Tucker, a mortgage expert at HomeOwners Alliance, said: “Seeing the average five-year mortgage rate hit 6 per cent is a real blow for borrowers, particularly those coming off much cheaper fixed deals who are already facing steep increases in other household bills.
“But while it’s important not to panic, it’s also important not to just sit and hope that rates will come back down either.”
She added: “If your current mortgage deal ends within the next six months, start looking at your options now.”
