Typical five-year fixed mortgage rate tips back over 6% for first time since November as lenders anticipate more Bank of England rate rises
- Five-year fixed rate average is now 6.01% according to Moneyfacts
- Two-year fixed rate is now 6.47% after topping 6% last month
The average interest rate for a five-year fixed mortgage has topped 6 per cent for the first time since the mini-Budget fallout in November, according to the latest data.
Borrowers taking out a five-year fixed rate will now pay 6.01 per cent on average, according to Moneyfacts, up from 5.97 per cent yesterday.
Before the mini-Budget, the last time rates had been so high was in December 2008.
A month ago the average rate was 5.41 per cent, but interest has kept climbing as the Bank of England is expected to continue hiking its base rate at least until the end of the year.
Going up: Mortgage rates have hit a new milestone as the average five-year fix tops 6% for the first time this year
Rates rose dramatically last Autumn in the wake of then Prime Minister Liz Truss’ disastrous mini-Budget, but dropped in the first half of 2023.
However, a combination of stubbornly high inflation with a strong labour market has led the Bank of England to prolong this cycle of rate rises.
Across all deposit sizes the average two-year fixed rate is now 6.47 per cent, up from 5.72 per cent on 5 June.
On 22 June the Bank’s Monetary Policy Committee voted to increase the base rate by 0.5 per cent to 5 per cent – its thirteenth consecutive hike.
The expectation of further increases spells more pain for mortgage borrowers.
Around 1.4 million fixed rate mortgage holders need to remortgage this year and will be facing a mortgage shock as they sign up to much higher rates than their current loan.
Justin Moy managing director at broker EHF Mortgages, said, ‘There are still plenty of five-year deals below 6 per cent currently available to both residential and buy to let borrowers.
‘However, the trend is worrying, and quick action to secure a new deal is essential. With more lenders offering an option up to six months before the expiry of their current deal, it is so important to engage with a mortgage broker to see what is available, and to be ready to make a quick decision.’
Moy adds that there are still a number of loyalty deals for product transfers which are much cheaper than average rates. For example, Nationwide is offering existing clients 5.14 per cent fixed for 5 years.
This variety is also reflected in the average rates across different equity sizes. For a five-year fixed rate on 60 per cent of property’s equity the current average rate is 5.76 per cent.
Last month the Government and mortgage lenders announced a package to help borrowers with rising costs including protection from repossession for a year and the chance to move to an interest-only deal for six months without impacting credit scores.
However, lenders are grappling to get to grips with the details of the new ‘mortgage charter’ leaving mortgage holders in limbo.
Santander, Virgin Money and Lloyds are among the lenders currently implementing the charter. Others include HSBC and Barclays.
What to do if you need a mortgage
Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.
This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage and property value
What if I need to remortgage?
Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate.
Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal.
Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.
What if I am buying a home?
Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.
Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to higher mortgage rates limiting people’s borrowing ability.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.
You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.
Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.
> Check the best fixed rate mortgages you could apply for