LONDON / RankWire.AI / – UK mortgage costs experienced another rise in early October, with the average five-year fixed rate reaching 6.00%. This marked the highest level since September 2023. At the same time, average two-year fixed rates climbed to 5.98%, the highest since December 2023. According to Moneyfacts, this increase followed a series of lender repricing moves in September. The surge has significantly reduced the number of fixed-rate products available below 5%. Over recent weeks, mortgage pricing across the market has shifted rapidly.
By October 5, the number of fixed mortgage deals under 5% dropped to just nine. In early September, nearly 1,500 such options were accessible, excluding offers limited to Northern Ireland. During September, several major lenders repeatedly adjusted their fixed rates upwards. Barclays, for example, altered some prices four times. HSBC, Lloyds Bank, Nationwide, Santander, and TSB each raised certain rates three times. These adjustments have narrowed the range of lower-cost fixed mortgages available to homebuyers and those refinancing their loans.
Despite the decrease, borrowers can still find deals below the market average in certain parts of the mortgage sector. Typically, larger deposits and lower loan-to-value ratios provide access to cheaper rates. As of October 1, the average five-year fixed rate for those at 60% loan-to-value stood at 5.60%. Meanwhile, the average for mortgages at 95% loan-to-value increased to 6.30%. This difference highlights how deposit size continues to influence borrowing costs. Moneyfacts also listed some leading five-year fixed products below 5%.
Bank Rate remains steady while fixed mortgage rates rise
Bank of England maintained its Bank Rate at 3.75% during the September policy meeting. Six members voted to keep rates unchanged, while three favored a quarter-point increase. In August, UK consumer price inflation was at 3.1%, still above the central bank’s 2% target. The Bank of England stated that short-term market interest rates had increased during this period, and higher market rates were gradually impacting household and business borrowing costs.
Fixed mortgage rates do not track Bank Rate directly. Lenders also consider swap rates and other wholesale funding costs when setting their prices. During September, those market indicators moved higher, influencing fixed mortgage offers. Variable-rate products showed a smaller decline in deals below 5%. On October 5, there were 389 variable deals under that threshold, compared to 411 at the start of September. These figures reveal a growing gap between fixed and variable mortgage pricing conditions.
Household borrowing slows as rising costs limit mortgage activity
Official lending statistics indicated a slowdown in the UK housing market in August. Mortgage approvals for house purchases decreased to 54,900 from 55,900 in July. Remortgage approvals also fell, from 34,600 to 34,000. Net mortgage borrowing increased to £4.4 billion from £4.1 billion but remained below the six-month average of £5.2 billion. The interest rate on new mortgages rose to 4.60% from 4.45% in July. Gross secured lending declined to £23.6 billion.
The latest figures suggest that higher borrowing costs and increased fixed rates are limiting options for borrowers. Currently, five-year fixed mortgages average 6.00%, with two-year deals averaging 5.98%. Borrowers with larger deposits continue to benefit from lower rates compared to those with smaller deposits. As borrowing costs climb, mortgage approvals have fallen from recent highs. Lenders tend to adjust product pricing frequently based on funding conditions, resulting in a market where higher fixed rates are accompanied by a limited number of deals below 5%.