Sub-5% fixed mortgage deals disappear
The average five-year fixed mortgage rate has reached 6%, its highest level since September 2023, as the number of deals priced below 5% collapses by 99%.
The average five-year fixed mortgage rate has reached its highest level since September 2023, standing at 6% as of Monday morning. This marks a significant climb from an average of 5.98% recorded just last Friday, with the last time rates were this high being September 27, 2023, when the average hit 6.03%.
Sub-5% fixed-rate deals collapse in market
The choice of fixed-rate mortgage products priced below 5% has plunged by 99% in a matter of weeks. Nearly 1,500 such deals were available at the beginning of September, but by Monday morning only nine remained.
| Product Type | Count at Start of September | Count as of Report Date |
|---|---|---|
| Fixed-rate deals below 5% | ~1,500 | 9 |
| Variable rate deals below 5% | 411 | 389 |
Including products available only in Northern Ireland, the total number of sub-5% fixed-rate deals stands at 107, still a sharp drop from over 1,600 at the start of the month. Rachel Springall, a finance expert, said: "Average fixed mortgage rates rising back to three-year highs will be disastrous news for borrowers."
Lenders raise rates amid broader economic pressures
Major High Street lenders have been aggressively increasing their fixed rates throughout September. Barclays hiked selected rates on four separate occasions. HSBC, Lloyds Bank, Nationwide, NatWest, Santander, and TSB each made three rounds of increases.
This activity is driven by rising costs for the banks themselves. Interest rates on UK government bonds, known as gilt yields, have been climbing, increasing lenders' wholesale funding costs. A global bond sell-off recently pushed UK gilt yields to an 18-year high. Also, swap rates, which directly influence fixed mortgage pricing, have soared. This surge is linked to global economic uncertainty and conflict in the Middle East, which has fueled inflation fears by affecting oil supplies. The Bank of England is widely expected to increase the UK's base rate before the year ends.
Millions of borrowers face higher repayments ahead
The vast majority of homeowners and buyers in the UK are on fixed-rate mortgages, where repayments remain unchanged until the deal expires, typically after two or five years. Millions of these deals are set to end in the next two years. Just over five million homeowners should expect their monthly mortgage repayments to increase by the end of 2028 as they are forced to remortgage at significantly higher rates.
Many borrowers had hoped for falling rates this year amid improved economic conditions, but global events have upended those expectations. The wider pressure is now impacting the cost of essential bills. Rachel Springall added: "Borrowers who were hoping mortgage rates would stabilise will be disappointed." Over five million homeowners should expect their monthly mortgage repayments to increase by the end of 2028.
