UK mortgage rates surge to three-year high as borrowing costs climb

The average five-year fixed-rate mortgage in the UK has reached 6% for the first time since September 2023, marking a significant increase in borrowing costs. Data from Moneyfacts reveals that the average two-year fixed rate is also near this threshold at 5.98%, the highest since December 2023. This surge comes as global bond market volatility has raised expectations of a Bank of England base rate hike, making loans more expensive for lenders to provide.

Borrowers now have far fewer options for fixed-rate mortgages below 5%, with only nine deals remaining, a 99% drop from the 1,494 available at the start of last month. The Bank of England’s base rate has not changed since December 2023, but rising swap rates tied to bond market turbulence have driven up mortgage pricing. Rachel Springall of Moneyfacts described the impact as "brutal," warning that higher rates will disappoint those hoping for stabilization.

The cost increase is particularly tough on borrowers ending existing fixed-rate deals or those looking to buy property. A £250,000 loan fixed at 6% for five years costs £158 more monthly than the same loan at the average rate of 4.94% in February. Higher mortgage costs are already slowing the housing market, with Nationwide reporting halved annual price growth in September. Ian Harris of NAEA Propertymark noted that buyers are highly sensitive to rate changes, which may force budget cuts or abandoned purchases.