Average five-year mortgage fix hits 6% as sub-5% deals all but vanish
Moneyfacts says the average five-year fix hit 6% on 5 October, a three-year high, and only nine fixed deals under 5% remain, down from 1,494 in September.
What's happened
The average five-year fixed mortgage rate has hit 6% for the first time in around three years, according to the financial data firm Moneyfacts. Its figures for Monday 5 October show the average five-year fix at 6.00%, up from 5.98% on the previous Friday and the highest since 27 September 2023, when it stood at 6.03%. The average two-year fix is close behind at 5.98%, the highest since mid-December 2023.
Cheap deals have almost disappeared. At the start of September there were 1,494 fixed mortgages priced below 5% (not counting deals only available in Northern Ireland). Now there are just nine, a drop of 99%. Including Northern Ireland-only deals, the count fell from 1,691 to 107. "The impact on sub-5% fixed mortgages has been brutal," said Rachel Springall, finance expert at Moneyfacts.
For comparison, in February this year the average five-year fix was 4.94% and the average two-year fix 4.85%.
Why rates are rising
The Bank of England held Bank Rate at 3.75% in September, but lenders price fixed deals on swap rates, which reflect where markets think rates are heading. "The past few weeks have seen pricing margins among major lenders come under immediate pressure from renewed swap rate volatility," said Rachel Springall. During September, Barclays raised selected fixed rates four times, while HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB each made three rounds of increases.
Variable deals have held up better. The number of variable-rate mortgages below 5% only slipped from 411 to 389 over the same period.
Who's affected
- Homeowners whose fixed deal is ending. UK Finance estimated in December that around 1.8 million fixed-rate mortgages are due to expire during 2026, up from 1.6 million in 2025. Anyone still to remortgage this year, or early next year, is now shopping in a dearer market.
- Buyers. Higher rates mean higher monthly payments for the same loan, which can affect how much a lender will offer. "For some buyers, even a relatively small increase in monthly repayments can mean they have to reduce their budget," said Ian Harris of NAEA Propertymark.
What it means in pounds: a worked example
Take a £200,000 repayment mortgage over 25 years. Using the standard repayment formula, with interest worked out monthly and the rate fixed for the whole term (so ignoring fees and any change in rate after the fix ends):
- At February's average five-year rate of 4.94%, repayments would be about £1,162 a month.
- At today's average of 6.00%, they would be about £1,289 a month.
That's roughly £126 more each month, or about £1,520 a year. Over a full five-year fix it adds up to around £7,600. These are averages, so the rate you're offered could be higher or lower depending on your deposit or equity, your lender and any product fee.
What to do now
- Check when your deal ends. Moneyfacts points out that you can often secure a new deal a few months before your current one ends. Some lenders allow three months for a product transfer and others six, so check with yours. Sarah Tucker of HomeOwners Alliance advises: "If your current mortgage deal ends within the next six months, start looking at your options now."
- Don't drift onto the standard variable rate. Get a product transfer offer from your lender, then compare it with the wider market.
- Look at trackers as well as fixes. Rachel Springall suggests some borrowers consider a variable deal such as a base rate tracker, particularly one without an early redemption penalty, so you can switch to a fix later if rates ease.
- Compare the total cost, not just the rate. A low rate with a big arrangement fee can cost more overall than a slightly higher rate with no fee, especially on a smaller loan.
- Get advice. A broker can search lenders you might not find yourself. Speak to a mortgage broker or adviser before you commit.
Your questions answered
How early can I lock in a new mortgage deal?
Often between three and six months before your current deal ends, depending on the lender. Ask yours, or a broker, what applies to you.
Are there still mortgages under 5%?
Very few fixed ones: nine on Moneyfacts' figures for 5 October, excluding Northern Ireland-only deals. There were still 389 variable-rate deals below 5%.
Should I fix for two or five years?
The averages are almost the same right now (5.98% and 6.00%), so it comes down to how long you want certainty and how likely you are to move or want flexibility. That's a personal decision, so talk it through with a mortgage broker or adviser.
Ways to save
Using a fee-free broker means advice doesn't add to your costs. Cashback Remortgages can look at remortgages, product transfers and purchases, so it's worth getting a quote to compare with your lender's own offer.
Sources: Mortgage Strategy (Moneyfacts data), The Intermediary, Express via AOL, Mortgage Solutions (Moneyfacts data), UK Finance
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