Average five-year mortgage rate hits 6% for first time in three years

The average interest rate on five-year fixed mortgages has climbed to 6% for the first time in three years, according to recent figures. This increase in mortgage costs can be attributed to higher lending expenses and global concerns over rising prices, interest rates, and government borrowing. Since mid-September, over 1,500 mortgage deals priced below 5% have disappeared, leaving borrowers with fewer affordable options.

The average rate for two-year fixed mortgages is currently at 5.98%. With a fixed mortgage rate remaining unchanged until the end of the term, usually after two or five years, borrowers must select a new one when their current deal expires. The majority of homeowners and buyers opt for this type of mortgage. Since the start of the Iran war, global economic uncertainty has driven up the cost of these deals.

Top high street lenders, such as Barclays, HSBC, Lloyds Bank, Nationwide, NatWest, Santander, and TSB, have made multiple rate hikes during September, pushing the average rate for a new five-year deal to its highest level since September 2023. Two-year deals now have the highest average rate since December 2023. Rachel Springall, a finance expert at Moneyfacts, warned that the surge in fixed mortgage rates could be catastrophic for borrowers.

Those nearing the end of their fixed deals should seek expert advice and compare mortgage options carefully, as some lenders may allow borrowers to lock in a rate three or six months before their current deal concludes.