LONDON / RankWire.AI / – UK mortgage costs increased once again in early October, with five-year fixed rates reaching 6.00%, marking their highest point since September 2023. Meanwhile, average two-year fixed rates also grew to 5.98%, the highest since December 2023. This rise was documented by Moneyfacts after a series of lender repricing actions in September, leading to a significant reduction in fixed-rate offerings below 5%. In recent weeks, mortgage pricing has experienced rapid shifts across the market.
By October 5, the number of fixed mortgage deals under 5% had dropped to just nine, compared to nearly 1,500 such products available at the beginning of September, excluding offers limited to Northern Ireland. During that month, several major lenders repeatedly increased selected fixed rates: Barclays altered some prices four times, while HSBC, Lloyds Bank, Nationwide, Santander, and TSB each raised certain rates three times. These adjustments have narrowed the variety of lower-cost fixed mortgages available to homebuyers and those refinancing existing loans.
Nonetheless, some parts of the mortgage market still offer rates below the market average. Typically, larger deposits and lower loan-to-value ratios enable access to more affordable borrowing options. As of October 1, the average five-year fixed rate stood at 5.60% for borrowers with 60% loan-to-value, whereas it rose to 6.30% for those with 95% loan-to-value. This difference highlights how deposit size continues to influence borrowing costs. Additionally, Moneyfacts listed some leading five-year fixed deals below 5%.
Bank Rate Holds Steady as Fixed-Rate Mortgages Rise
Bank of England maintained its Bank Rate at 3.75% during the September policy meeting, with six members voting to keep rates unchanged and three favoring a quarter-point increase. UK consumer price inflation reached 3.1% in August, remaining above the central bank’s 2% target. The Bank stated that short-term market interest rates had increased during this period and that higher market rates were impacting borrowing costs for households and businesses.
Fixed mortgage rates do not solely follow Bank Rate movements; lenders also factor in swap rates and other wholesale funding costs when determining prices. These market indicators rose during September, influencing fixed mortgage offerings. In contrast, variable-rate products showed a smaller decline in availability below 5%, with 389 variable deals under that level on October 5, down from 411 at the start of September. This has resulted in a wider disparity between fixed and variable mortgage pricing conditions.
Rising Borrowing Costs Slow UK Housing Activity
Official lending figures also indicated a slowdown in the UK housing market during August, with mortgage approvals for house purchases decreasing to 54,900 from 55,900 in July. Remortgage approvals declined slightly from 34,600 to 34,000, while net mortgage borrowing increased to £4.4 billion from £4.1 billion, though still below the six-month average of £5.2 billion. The effective interest rate on new mortgages climbed to 4.60% from 4.45% in July, and gross secured lending fell to £23.6 billion.
These latest figures suggest borrowers are facing higher average fixed rates and a shrinking pool of low-cost deals. Currently, five-year fixed mortgages average 6.00%, with two-year products at 5.98%. Borrowers with larger deposits continue to benefit from lower average rates compared to those with smaller deposits. Additionally, mortgage approvals have decreased amid rising borrowing costs, with lenders able to adjust product pricing frequently as funding conditions change. The market now features higher fixed-rate averages and significantly fewer deals priced below 5%.