5 year fixed mortgage rates 6%: remortgage searches up 40%

Mortgage advisers ran 861,000 residential remortgage searches in September, 40% more than in August, according to Twenty7tec data reported by Mortgage Solutions on Tuesday 6 October. The jump came as lenders pushed up prices: 5 year fixed mortgage rates 6% on average, according to Moneyfacts, the highest since September 2023, while the average two-year fixed rate is 5.98%.

The rise affects anyone coming to the end of a fixed deal and anyone trying to buy a home. Most homeowners and buyers take out fixed-rate mortgages, the BBC noted, so the rate they choose is locked in until the deal expires, usually after two or five years.

Remortgage searches jump as rates climb

Twenty7tec said advisers carried out more than 1.9 million mortgage searches in September, up 23% on August and 15% on September last year. Of those, 861,000 were for residential remortgage products, a rise of 40% on August and 44% year on year.

Our own arithmetic on those figures suggests remortgages made up about 45% of all adviser searches in September, and that the August remortgage total was roughly 615,000. Purchase activity was far flatter. Residential purchase searches reached 617,709, up 8% on August but only 1% on a year earlier, while first-time buyer searches rose 3% on the month to 138,791 and remained 4% below September last year.

Nathan Reilly, chief customer officer at Twenty7tec, said: “Remortgaging is doing a huge amount of the work. When we see growth on that scale, it tells us that existing homeowners reviewing their borrowing are becoming an increasingly important part of adviser workloads.” The figures count searches by intermediaries rather than completed loans, so they show interest in switching rather than how many people have signed new deals.

Legal work pointed the same way. Conveyancing distributor Conveybuddy recorded a 61% month-on-month rise in instructions for its remortgage product in September, bringing activity within 11% of the levels seen in March. Across the third quarter, remortgage instructions rose 19% on the second quarter, against 8% for sales and purchases.

Why UK fixed mortgage rates have jumped

Lenders have put up prices repeatedly in recent weeks. Moneyfacts said the biggest High Street lenders made repeated fixed-rate increases during September: Barclays raised selected fixed rates on four occasions, while HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB each made three rounds of increases.

The Guardian reported that turmoil in global bond markets has raised expectations of a base rate rise. That has pushed up swap rates, which City AM described as a primary benchmark for pricing fixed-rate mortgages. The BBC said global economic uncertainty has been pushing up the cost of deals since the Iran war began, and that rising gilt yields have raised lenders’ wholesale funding costs.

The effect on choice has been sharp. Moneyfacts counted 1,494 fixed-rate deals priced below 5% at the start of September, and only nine remained by 5 October, a fall of 99%. Rachel Springall, a finance expert at Moneyfacts, said:

“Average fixed mortgage rates rising back to their highest in a year will be disastrous news for borrowers.”

What 5 year fixed rate mortgages now cost borrowers

The HomeOwners Alliance calculated that the monthly cost of a £250,000 loan fixed at 6% for five years is £158 higher than the same loan at 4.94%, the average rate Moneyfacts reported at the start of February. Our own arithmetic on that figure shows what it means over time: £158 a month is £1,896 a year, or £9,480 across a five-year fix.

Ian Harris, president of the estate agents’ body NAEA Propertymark, said members were “seeing first-hand how sensitive buyers are to mortgage rates”. He added that “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.” Nationwide reported last week that annual house price growth halved in September, according to the Guardian.

Mortgage rates rising in the UK: what happens next

The Bank of England has left its base rate at 3.75%, City AM reported, and the Guardian said it has not changed since December last year. Rate-setter Dave Ramsden said last week that inflation risks have “tilted more to the upside” since the Bank’s September decision. He said that if upside pressures continue to build, “there could be a case for increasing Bank Rate.”

The BBC said the number of sub-5% variable-rate deals has stayed broadly stable, according to Springall, and some borrowers are choosing mortgages that track the base rate. Those tracker deals will move if the Bank changes rates, so they carry a different kind of risk from a fix.

For those whose deal is ending, Springall said borrowers would be “wise to seek advice and compare deals carefully”. She said some lenders let customers lock in a new rate three months before their current deal ends, and others allow six months. The practical first step is to check your own lender’s window, because the Twenty7tec figures suggest many homeowners are already acting.

The BBC reported that, on Bank of England forecasts, just over five million homeowners should expect higher monthly repayments by the end of 2028. It added that the government is under pressure to support those most likely to struggle at the Budget later this month.