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

Blow to homeowners as five-year mortgages hit 6% for first time in over three years Two-year fixes are close behind – but tracker deals may present a option for some homeowners - Bookmark - CommentsGo to comments Become an Independent member to bookmark this article Already a member? Log in 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. Invest at least £100 in Stocks or ETFs of your choice. Get fractional shares worth £50! Terms and conditions apply. ADVERTISEMENT Invest at least £100 in Stocks or ETFs of your choice. Get fractional shares worth £50! Terms and conditions apply. ADVERTISEMENT “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. Join our commenting forum Join thought-provoking conversations, follow other Independent readers and see their replies Comments [Image text:] Application Form Mortgage -ta this Application Form in ink and write in BLOCK CAPITALS.All applicable s ctions to do so will result in a delay with the processing then you MORTGAGELOAN AGREEMENT This Deed incorporates the Mortgage Conditions, the Rules of the Society and th terms and conditions set out in the Offer of Advance, copies of which the Borrow arantee charges