Published5 October 2026, 10:02 BST
The average interest rate on a new five-year fixed mortgage deal has hit 6% for the first time in three years, figures show.
The cost of home loans has been rising in recent weeks, as lenders face higher costs amid international concern over rising prices, interest rates, and government borrowing costs.
It means home buyers and anyone renewing a fixed deal have seen about 1,500 mortgage deals priced below 5% vanish since the start of September, according to the financial information service Moneyfacts.
It described the situation as "brutal" for borrowers, with the average rate on five-year deals now at 6%, and at 5.98% on two-year fixed mortgages.
For borrowers, the interest rate on a fixed mortgage does not change until it expires, usually after two or five years, and a new one is chosen to replace it. The vast majority of homeowners and buyers have this kind of mortgage.
Since the Iran war began, global economic uncertainty has been pushing up the cost of deals.
Moneyfacts said that the biggest High Street lenders had made repeated fixed rate increases during September. Barclays increased selected fixed rates on four occasions, while HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB each made three rounds of increases.
It meant that the average rate on a new five-year deal was at its highest since September 2023. On two-year deals, the average rate is at its highest since December 2023.
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Interest rates fluctuate based on the Bank of England's base rate and market conditions
"Average fixed mortgage rates rising back to three-year highs will be disastrous news for borrowers," said Rachel Springall, finance expert at Moneyfacts.
"Borrowers who were hoping mortgage rates would stabilise will be disappointed."
She said that those coming to the end of a fixed deal would be "wise to seek advice and compare deals carefully".
Some lenders could allow people to lock in a rate three months before their current deal ends, while others could allow six months, she said.
Springall said rate rises were "inevitable" because lenders' wholesale funding costs had climbed as a result of rising gilt yields.
Interest rates – known as the yield – on government bonds have been going up, meaning it costs the government more to borrow over the long term.
The knock-on impact of this on the mortgage market has meant that the number of fixed-rate deals priced below 5% has plunged by 99%, from 1,494 since the start of September 2026 to nine now.
In contrast, the number of sub-5% variable rate mortgages has remained broadly stable, Springall said, leading some borrowers to chose deals that track the Bank of England's base rate.
Millions of mortgage-holders are coming to the end of their current deals in the next two years.
Just over five million homeowners should expect their monthly mortgage repayments to increase by the end of 2028, according to Bank of England forecasts.
Some may have expected rates to have fallen this year, owing to improved economic conditions, but the Iran war has upended many of those expectations.
It has also led to wider pressure on the cost of essential bills.
On Friday, drivers saw the average cost of diesel rise above £2 a litre in the UK for the first time, according to the RAC motoring group.
Domestic energy prices also rose by 4% at the start of October, and forecasters have predicted a 16% increase when regulator Ofgem sets its next price cap for January.
The government is under pressure to support those most likely to struggle to pay at the Budget later this month.
How are you coping with mortgage repayments? Are you trying to get on the housing ladder?
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