Mortgage Rates Surge to 6% Highest in Three Years

The average interest rate on new five-year fixed mortgages has climbed to 6%, marking the highest level in three years. This surge in mortgage costs comes as lenders face increased expenses due to global economic uncertainty and rising borrowing costs. According to Moneyfacts, a financial information service, approximately 1,500 mortgage deals priced below 5% have disappeared since the start of September.

The situation has been described as "brutal" for borrowers, with the average rate on five-year deals now at 6%, and 5.98% on two-year fixed mortgages. The rising rates are a result of repeated increases by major lenders, including Barclays, HSBC, Lloyds Bank, Nationwide, NatWest, Santander, and TSB, each making multiple adjustments during September.

Rachel Springall, a finance expert at Moneyfacts, warned that the rising rates will be "disastrous" for borrowers. She advised those coming to the end of their fixed deals to seek advice and compare deals carefully. Some lenders allow borrowers to lock in a rate up to six months before their current deal ends.

The increases in mortgage rates are "inevitable" due to higher wholesale funding costs for lenders, driven by rising gilt yields. The number of fixed-rate deals priced below 5% has plummeted by 99%, from 1,494 at the start of September to just nine. In contrast, the number of sub-5% variable rate mortgages has remained stable, leading some borrowers to consider deals that track the Bank of England's base rate.