Blow to homeowners as five-year mortgages hit 6% for first time in over three years

Homeowners and prospective house buyers in Britain have suffered another blow as the average five-year fixed deal hit 6 per cent on Monday for the first time in more than three years.

Buy-to-let and residential mortgages alike hit the milestone, having surged across September as a succession of lenders pulled their best deals from the market – with just nine sub-5 per cent deals left on the market, according to Moneyfacts data.

That’s a decrease of 99 per cent since the start of September, driven by rising swap rates – which mortgage deals are priced from – as a result of higher bond yields and inflation expectations.

The last time five-year mortgage deals were at 6 per cent was September 2023, when they sat at 6.03 per cent. Three years ago, it was a prolonged spell at 6 per cent or above – which lasted from from 4 July to 27 September. During that spell the average five-year fix peaked at 6.37 per cent in early August.

“Average fixed mortgage rates rising back to three-year highs will be disastrous news for borrowers,” said Rachel Springall, finance expert at Moneyfactscompare.co.uk.

“The past few weeks have seen pricing margins among major lenders come under immediate pressure from renewed swap rate volatility. As wholesale funding costs climb on the back of rising gilt yields, fixed rate adjustments are somewhat inevitable.”

In terms of those looking to take new mortgage deals – it’s estimated around half a million homeowners needed a new deal in the final three months of this year – there is one option which has proven increasingly popular among those who can handle some potential swing in monthly costs.

“The number of sub-5 per cent variable rate mortgages has remained broadly stable, from 411 at the start of September to 389 today,” added Ms Springall.

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“It may then be no surprise if borrowers are seriously considering a variable rate deal, such as a base rate tracker mortgage, particularly if it does not apply an early redemption penalty.”

Tracker mortgages can move up and down if the Bank of England alter their base rate, which is expected to be the case before the end of 2026 - though even an uplift here could still leave some people better off than taking a fix above 6 per cent.

In addition, average two-year fixes are still just below the six per cent threshold, sat at 5.98 per cent - also its highest level since September 2023.

Then, two-year rates stayed above 6 per cent from mid-June to the first week of December, peaking at 6.86 per cent in the July of 2023.