The average cost of a five-year fixed-rate mortgage has hit the 6% barrier for the first time in three years, as jitters in the money markets make the loans more expensive for lenders to offer. Figures from financial information provider Moneyfacts show the average is now 6.00%, its highest point since September 2023, while the average two-year fixed rate is not far behind at 5.98%, its highest since December of the same year. In recent weeks most big banks and building societies have put up prices as turmoil in global bond markets has increased expectations of a base rate rise.
Meanwhile, borrowers in Great Britain have seen their choice of fixed-rate mortgages costing below 5% shrivel to only nine options, according to Moneyfacts. That marks a 99% plunge in the market since the start of last month, when there were 1,494 deals priced below that level. There has been no change in the Bank of England base rate since December last year, but volatility in the bond markets has driven up the swap rates that affect the pricing of fixed-rate mortgages.
Rachel Springall, a finance expert at Moneyfacts, said the impact on rates had been “brutal”. She said: “Average fixed mortgage rates rising back to three-year highs will be disastrous news for borrowers. Borrowers who were hoping mortgage rates would stabilise will be disappointed.” The rise in prices is bad news for borrowers finishing existing fixed-rate deals who at the start of the year may have been looking forward to falling costs, as well as those hoping to take out a mortgage to buy a property.
Figures from the HomeOwners Alliance show the monthly cost of a £250,000 loan fixed at 6% for five years is £158 higher than the same-sized loan locked in at 4.94%, which was the average rate reported by Moneyfacts at the start of February. There are already signs that higher mortgage costs are weighing down the housing market, with Nationwide building society last week reporting that annual price growth had halved in September. Ian Harris, the president of the estate agents’ body NAEA Propertymark, said members were “seeing first-hand how sensitive buyers are to mortgage rates”, and the rapid disappearance of sub-5% deals would add further pressure to affordability.
He said: “For some buyers, even a relatively small increase in monthly repayments can mean they have to reduce their budget or step back from a purchase altogether. Equally, homeowners coming off fixed-rate deals may face significantly higher repayments, which could affect their decision to move.”
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