Average five-year mortgage rate hits 6% for first time in three years

The average five‑year fixed‑rate mortgage in the United Kingdom has slipped to exactly 6.00%, the highest level since September 2023 and the first time in three years that the benchmark has touched the six‑percent mark. Moneyfacts data show the two‑year fixed rate hovering just behind at 5.98%, while the pool of sub‑5% fixed‑rate products has evaporated – from 1,494 deals at the start of September to just nine today, a 99% collapse.

The surge is not a mystery of policy alone. Over the past month gilt yields have raced upward: 30‑year gilts breached 6% for the first time since 1998, ten‑year yields reached their highest level since 2007 and five‑year yields matched 2008 highs. Those moves feed directly into the swap market, where five‑year swap rates climbed from 4.35% to 4.70% and two‑year swaps from 4.25% to 4.59%. Lenders price fixed mortgages off these swaps, and the tighter funding environment has forced a wave of rate hikes across the major banks – Barclays, HSBC, Lloyds, Nationwide, NatWest, Santander and TSB all raised rates multiple times in September.

The mechanics are sharpened by the spread between Treasury yields and mortgage rates.

For borrowers, the math is stark. A £250,000 loan at 6% over five years costs about £158 more per month than the same loan at the February average of 4.94%. Homeowners completing fixed‑rate terms now face higher repayments, and prospective buyers see their borrowing power shrink. "Borrowers who were hoping mortgage rates would stabilise will be disappointed," warned Moneyfacts analyst Rachel Springall. Estate‑agent bodies report a noticeable softening in demand, with Nationwide noting price growth halving in September.

However, those numbers hinge on the Federal Reserve’s policy path. Deloitte expects a rate cut before the end of 2027, which could ease Treasury yields and, by extension, mortgage rates. The timing and magnitude of that cut remain the biggest unknown, as does whether the spread will continue its slow decline or revert to higher levels if funding pressures persist.

Whether the next few quarters will see a modest easing or a further hardening of rates depends on how quickly monetary‑policy levers and gilt‑yield dynamics align.