Average five-year fixed mortgage rate hits 6% for first time in three years
Banks and building societies raise prices as turmoil in bond markets increases expectations of base rate rise The average cost of a five-year fixed-rate mortgage has hit the 6% barrier for the first time in three years, as jitters in the money markets make the loans more expensive for lenders to offer. Figures from financial information provider Moneyfacts show the average is now 6.00%, its…
The national average cost of a five-year fixed-rate mortgage has surpassed the 6% mark for the first time in three years, according to data from Moneyfacts. This increase is attributed to heightened concerns in the bond markets, which have led lenders to charge more for these loans. Two-year fixed rates have also risen, reaching 5.98%, a peak not seen since December 2023.
The market for fixed-rate mortgages costing less than 5% has dwindled to just nine options, a dramatic 99% decline since early last month when there were 1,494 such deals available. Despite the Bank of England maintaining its base rate at 4.5% since December, the increased volatility in bond markets has driven up swap rates that influence mortgage pricing.
Financial experts warn that these higher rates will be detrimental to borrowers, particularly those who were anticipating stable rates and those seeking to purchase property. The monthly payment on a £250,000 mortgage fixed at 6% over five years would be £158 more than one fixed at 4.94% at the beginning of February, leading to concerns about the impact on the housing market as prices have already slowed by 50% in September.
Estate agents report that buyers are highly sensitive to mortgage rates, with even modest increases potentially forcing them to reduce their budgets or abandon purchases.
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