UK mortgage rates surge to three-year high amid economic uncertainty
The average interest rate on new five-year fixed mortgage deals in the UK has reached 6%, a level not seen in three years. This surge in rates comes as lenders face higher costs due to global economic uncertainty, particularly after the Iran war. Since the start of September, approximately 1,500 mortgage deals priced below 5% have been withdrawn, according to Moneyfacts.
Major lenders like Barclays, HSBC, Lloyds Bank, Nationwide, NatWest, Santander, and TSB have increased their fixed rates multiple times in September. As a result, the average rate on five-year deals is now at its highest since September 2023, while two-year fixed mortgages have hit their highest average rate since December 2023.
Rachel Springall, a finance expert at Moneyfacts, described the situation as 'brutal' for borrowers. She advised those coming to the end of their fixed deals to seek advice and compare deals carefully, noting that some lenders allow rate locking three to six months before the current deal ends. Springall attributed the rate rises to increased wholesale funding costs for lenders, driven by rising gilt yields.
The number of fixed-rate deals priced below 5% has plummeted by 99% since the start of September 2026, while variable rate mortgages have remained stable. This has led some borrowers to consider deals that track the Bank of England's base rate. The economic uncertainty has also contributed to rising domestic energy prices, with a 4% increase in October and a predicted 16% rise in January.