LONDON / RankWire.AI / – UK mortgage costs increased once again in early October, reaching 6.00% for the average five-year fixed rate. This marked the highest point since September 2023. Meanwhile, average two-year fixed rates climbed to 5.98%, their peak since December 2023. Moneyfacts documented this upward trend following a series of lender repricing actions carried out during September. Consequently, the availability of fixed-rate products below 5% has sharply diminished. Over recent weeks, mortgage pricing has experienced significant shifts across the entire market.
As of October 5, the count of fixed mortgage options below 5% had dwindled to just nine. At the start of September, nearly 1,500 such deals were accessible, excluding those limited to Northern Ireland. Throughout September, several major lenders increased selected fixed rates multiple times; Barclays altered some prices four times, while HSBC, Lloyds Bank, Nationwide, Santander, and TSB each raised their rates three times. These adjustments narrowed the pool of affordable fixed mortgages for homebuyers and those refinancing existing loans.
Nonetheless, borrowers can still find deals below the market average in certain segments of the mortgage landscape. Typically, larger deposits and lower loan-to-value ratios facilitate access to more competitive pricing. On October 1, the average five-year fixed rate for 60% loan-to-value mortgages was 5.60%, whereas it rose to 6.30% for loans at 95% LTV. This disparity highlights how deposit size continues to influence borrowing costs. Moneyfacts also identified several prominent five-year fixed products priced under 5%.
Bank Rate remains steady, but fixed mortgage rates continue to climb
Bank of England maintained the Bank Rate at 3.75% following its September policy meeting. Six members preferred to keep the rate unchanged, while three members supported a quarter-point hike. Consumer price inflation in the UK reached 3.1% in August, remaining above the bank’s 2% target. The Bank of England indicated that short-term market interest rates had increased during this period, and higher market rates were contributing to rising borrowing costs for households and businesses.
Fixed mortgage rates do not solely track Bank Rate. Lenders also consider swap rates and other wholesale funding expenses when setting their prices. These market indicators moved upward in September, impacting fixed mortgage offerings. Variable-rate mortgages saw a smaller decrease in availability below 5%, with 389 such deals on October 5 compared to 411 at the beginning of September. This discrepancy shows a growing gap between fixed and variable rate conditions.
Household borrowing activity declines amid rising costs
Official lending statistics from August suggest a slowdown in the UK housing market. Mortgage approvals for home purchases decreased to 54,900 from 55,900 in July. Remortgage approvals fell to 34,000 from 34,600. Meanwhile, net mortgage borrowing increased slightly to £4.4 billion from £4.1 billion but remained below the six-month average of £5.2 billion. The average interest rate on newly issued mortgages rose from 4.45% in July to 4.60%. Additionally, gross secured lending declined to £23.6 billion.
The latest mortgage figures reflect higher fixed rates and a shrinking pool of affordable deals. Currently, five-year fixed-rate mortgages average 6.00%, with two-year products averaging 5.98%. Those with larger deposits continue to benefit from lower average rates compared to borrowers with smaller deposits. Moreover, approval numbers have fallen as borrowing costs have increased, with lenders frequently adjusting product prices in response to funding conditions. The market now features higher average fixed rates and significantly fewer deals priced below 5%.