The average rate on a new five-year fixed-rate mortgage in the UK has risen to 6% for the first time in three years, according to financial data provider Moneyfacts (Moneyfactscompare.co.uk). The average two-year fixed rate has also climbed, to 5.98%, its highest level since December 2023. The increases have been driven by a string of rate hikes from major High Street lenders during September, including Barclays, HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB.
The rapid repricing has sharply reduced the number of competitively priced deals available to borrowers. The number of fixed-rate mortgages priced below 5% has fallen by 99% since the start of September, from about 1,500 to just nine, Moneyfacts said (excluding deals limited to Northern Ireland; including those, the total fell from 1,691 to 107, a 94% drop). Sub-5% variable-rate mortgages, by contrast, have stayed broadly stable, prompting some borrowers to consider base-rate tracker deals instead. For overseas buyers financing a UK property purchase — whether through a standard UK mortgage as a non-resident, a buy-to-let product, or an international mortgage arranged through a private bank or specialist lender — the same forces apply: these products are typically priced off the same wholesale funding costs and gilt yields that have pushed the mainstream rates Moneyfacts tracks to a three-year high, so the direction of travel is the same even where the exact rate offered differs from the headline figures above.
The rate rises stem from climbing gilt yields — the interest the UK government pays to borrow — which have pushed up lenders’ wholesale funding costs, Moneyfacts finance expert Rachel Springall said. This is Money reported that market expectations have reversed sharply this year: at the start of 2026 most borrowers could get rates below 4%, with some two-year fixes as low as 3.5%, on expectations that the Bank of England would keep cutting its base rate as inflation fell. The Bank of England instead held its base rate at 3.75% in September — the sixth consecutive hold since December 2025 — and, per This is Money, is now expected to raise rates rather than cut them, after an escalation of the conflict with Iran pushed up energy costs and reignited inflation fears. The BBC reported that UK diesel prices rose above £2 a litre for the first time on the same day, and that domestic energy prices rose 4% at the start of October, with forecasters predicting a further 16% rise when Ofgem sets its next price cap in January.
This is Money reported that investors are betting the Bank of England’s base rate will rise from its current 3.75% to 4.75% within a year, and potentially as high as 5%. The Bank of England forecasts that just over five million UK homeowners will see their monthly mortgage payments rise by the end of 2028 as they come off cheaper fixed deals, the BBC reported — among them hundreds of thousands of households who locked in five-year fixes averaging just 1.05% in October 2021, according to broker L&C Mortgages, and who now face refixing at 5% or more. Springall said borrowers nearing the end of a fixed deal “would be wise to seek advice and compare deals carefully,” noting some lenders allow a new rate to be locked in three to six months before an existing deal ends. David Hollingworth, associate director at L&C Mortgages, said rising funding costs “may lead to further repricing in the weeks ahead” and that borrowers considering fixing “would be wise to act sooner rather than later.” The BBC reported that the UK government is under pressure to support the households most at risk in Chancellor John Healey’s Budget later this month.
References
BBC News – Average Five-Year Mortgage Rate Hits 6% for First Time in Three Years / IFA Magazine – Mortgage Rate Hikes See Sub-5% Fixes Vanish as Average Five-Year Fixed Hits 6% / This is Money – Five-Year Fixed Mortgages Break 6% Barrier as Lenders Keep Pushing Rates Higher
