UK mortgage rates have climbed to their highest level in three years, adding to pressure on millions of households as financial markets increasingly price in further interest rate rises from the Bank of England.
The average five-year fixed residential mortgage rate has risen to 5.92 per cent, its highest level since mid-October 2023, according to industry data from Moneyfacts. The average two-year fixed rate has also increased, reaching 5.88 per cent, its highest level since April.
The rise reflects higher “swap” rates, which influence the pricing of fixed-rate mortgages, as well as growing expectations that the Bank of England may need to raise borrowing costs again.
Those pressures have been amplified by the economic fallout from the war in the Middle East, particularly higher global energy prices and renewed inflation concerns.
Rachel Springall, finance expert at Moneyfacts, said borrowers taking a typical two-year fixed mortgage were now paying around £150 a month more than they would have done had they taken the deal at the start of this year.
“There were notable rate hikes last week from the major brands, some increasing for the second time this month to catch up with rising swap rates,” she explained.
“The average two-year fixed rate is approaching its highest point seen this year, rising by over 1% since the start of March, and the average five-year fixed is now back to highs not seen since October 2023, the month after the infamous mini-Budget.
“In the months ahead, remortgage business is expected to boom, so any borrower coming off a cheap fixed rate must seek advice. It could be a good opportunity for lenders to consider extending their product transfer windows while rates remain volatile, giving existing customers more time to secure a new deal while also helping lenders protect their mortgage books.”
The pressure is already changing borrower behaviour. Mortgage customers are approaching brokers months before their existing deals expire, reflecting concerns over a sharp increase in monthly repayments when cheap fixed-rate loans expire.
UK Finance data shows that 1.8 million fixed-rate mortgage deals are due to end this year, following 1.6 million last year.
Nick Gatti, mortgage adviser at NG Mortgages, said: “We’ve seen a surge of customers getting in touch five, six, even seven months before their current fixed rate ends. Especially those coming off sub-2%, five-year fixes.
“It’s not the wrong thing to do either. Especially with a lot of lenders reducing the lead time on their product switches to three or four months.
“The plan for most now seems to be get everything prepped as early as possible, lock in a new rate at bang on six months and then, most importantly, watch the market.”
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