Average Five-Year Mortgage Rate Hits 6% for First Time Since 2023

The average interest rate on a new five-year fixed mortgage deal hit 6% for the first time in three years, according to figures reported by BBC News. The average two-year fixed rate stood at 5.98%, the highest level since December 2023, financial information service Moneyfacts said.

What is the average five-year fixed mortgage rate right now?

The five-year average reached 6% on October 5, the highest level since September 2023, Moneyfacts told the BBC. For borrowers, a fixed mortgage rate does not change until the deal expires, typically after two or five years, at which point a new rate is chosen. The BBC reported that the vast majority of UK homeowners and buyers hold this type of mortgage, meaning the increase affects a large share of the market when deals come up for renewal.

Why are mortgage rates rising now?

Lenders have faced higher costs in recent weeks amid international concern over rising prices, interest rates, and government borrowing costs, according to the BBC. The report said that global economic uncertainty has been pushing up the cost of mortgage deals since the Iran war began. Those pressures have fed through to the rates High Street banks offer new and renewing borrowers.

How many lenders raised rates, and how often?

Moneyfacts said the biggest High Street lenders made repeated increases to fixed rates during September. Barclays raised selected fixed rates on four separate occasions during the month, the BBC reported. HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB each raised rates three times in September, according to Moneyfacts data cited by the BBC.

By the numbers

• 6% — average rate on a new five-year fixed mortgage, the highest since September 2023
• 5.98% — average rate on a new two-year fixed mortgage, the highest since December 2023
• ~1,500 — mortgage deals priced below 5% that have disappeared since the start of September, per Moneyfacts
• 4 — separate fixed-rate increases Barclays made in September
• 3 — rounds of increases each made by HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB during the month

What does this mean for people buying or renewing a mortgage?

Moneyfacts finance expert Rachel Springall described the situation as "brutal" for borrowers in comments reported by the BBC.

"Average fixed mortgage rates rising back to three-year highs will be disastrous news for borrowers," Springall said.

She added that homeowners who had expected rates to level off would be disappointed. "Borrowers who were hoping mortgage rates would stabilise will be disappointed," Springall said, according to the BBC report.

The practical effect falls hardest on two groups: people buying a home for the first time who need a new mortgage, and existing homeowners whose fixed deal is expiring and who must select a new rate. Because UK fixed-rate mortgages lock in a rate only for the length of the term, a borrower coming off a cheaper deal taken out two or five years ago will likely face a materially higher rate today, even without taking on more debt.

How does this compare with the two-year fixed rate?

The two-year average, at 5.98%, sits just below the five-year figure and is at its highest point since December 2023, the BBC reported. The near-identical level of the two rates means borrowers choosing between a shorter and longer fixed term are not getting a clear discount either way at present, based on the averages Moneyfacts published.

What to watch

• Whether major lenders — Barclays, HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB — announce further fixed-rate increases in October after their repeated moves in September
• Whether the number of mortgage deals priced below 5% continues to shrink from the roughly 1,500 that have vanished since early September, per Moneyfacts
• Any shift in government borrowing costs or international market conditions tied to the Iran war, which the BBC cited as a driver of lender funding costs
• Whether the five-year and two-year average rates diverge again, or continue to track close together as they did at 6% and 5.98%

The BBC's reporting did not include comment from the Bank of England or from individual lenders beyond the rate-change data compiled by Moneyfacts.