Average five-year mortgage rate hits 6% for first time in three years
The cost of a new fixed-rate mortgage has been rising in recent weeks as lenders face higher costs.
For the first time in three years, the average interest rate on a new five-year fixed mortgage has risen to 6%, according to recent figures. This increase is due to higher costs faced by lenders amid global concerns over rising prices, interest rates, and government borrowing costs. As a result, about 1,500 mortgage deals priced below 5% have disappeared since the beginning of September, according to financial information service Moneyfacts.
The average rate on five-year deals is now 6%, and on two-year fixed mortgages, it stands at 5.98%. The interest rate on a fixed mortgage remains unchanged until it expires, typically after two or five years, at which point borrowers choose a new one. Since the start of the Iran war, global economic uncertainty has been driving up the cost of these deals.
Major high street lenders, including Barclays, HSBC, Lloyds Bank, Nationwide, NatWest, Santander, and TSB, have made multiple fixed rate increases during September. This has pushed the average rate on a new five-year deal to its highest level since September 2023, and on two-year deals, the average rate is at its peak since December 2023.
Rachel Springall, a finance expert at Moneyfacts, warned that the rise in average fixed mortgage rates back to three-year highs will be disastrous for borrowers. Those nearing the end of a fixed deal are advised to seek advice and compare deals carefully, as some lenders may allow people to lock in a rate three months before their current deal ends, while others may permit six months.
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