UK interest rate outlook: two-year fixes edge toward 6%

Anyone looking for a UK interest rate forecast for the next five years will not find a settled answer in this week’s figures, but they do show where borrowing costs stand today. The average two-year fixed mortgage rate is 5.97%, according to Moneyfacts figures, up from 5.68% around a month ago. That is within a whisker of 6%.

The average five-year fixed rate reached 6% earlier this month for the first time in almost three years, according to The Negotiator, and has since eased back to 5.99%. For anyone remortgaging or buying soon, the headline number matters less than what it does to a monthly payment, which this article works through.

UK mortgage rates 2026: what has changed

Moneyfacts says the average two-year fix was 5.68% about a month ago and is now 5.97%. The last time the two-year average was at or above 6% was on 7 December 2023, when it stood at 6.01%. The five-year average was 5.73% a month ago and is now 5.99%, having touched 6% in between.

Borrowers still have a lot of choice. Moneyfacts counts around 8,560 residential mortgage products. In buy-to-let, the average two-year rate is 5.63% and the five-year average is 6.01%, with 5,192 products available to landlords. PropertyWire reported that buy-to-let yields are at their highest level since 2011, which may soften the blow for some investors, and it described the current climate as tougher than the sub-5% rates seen in recent periods.

As for why rates are rising, Mark Harris, chief executive of broker SPF Private Clients, pointed to swap rates, which underpin the pricing of fixed-rate mortgages and have proved volatile. Victoria Scholar, head of investment at Interactive Investor, said the Middle East conflict and this year’s energy disruption had pushed up mortgage rates. She added that with the Bank of England “leaning towards a hawkish bias”, the pressures “show no sign of abating”.

Who pays more: a worked example

The rise is not the same for everyone. Anyone already on a fixed deal is unaffected until it ends. People remortgaging or buying now face higher quotes than a month ago, and Bellway said affordability remains constrained, particularly for buyers needing higher loan-to-value mortgages. Jason Honeyman, Bellway’s chief executive, said “affordability remains a major barrier for many prospective buyers”.

To show the effect, we have calculated repayments on a £200,000 mortgage over 25 years, ignoring fees. These figures are our own illustration at the stated rates, not a quote from any lender, and your rate will depend on your deposit, credit record and the product you choose.

So the move from 5.68% to 5.97% adds about £35 a month, or roughly £840 over a two-year fix. On a £300,000 loan the monthly difference would be around £53. The step from 5.97% to exactly 6% adds only about £4 a month, so the psychological barrier matters far less than the rise that has already happened.

Mr Harris stressed that the Moneyfacts figure “includes almost every deal under the sun” and that “there are still plenty of two-year deals well below 6%”. Atom bank, for instance, said its Prime mortgages started at 5.29% with a £900 fee. Check whether any such rate is still on offer.

Should I fix for 2 or 5 years now? What to do

None of the sources says which length is better, and the answer depends on your circumstances. What the averages show is that the two-year figure (5.97%) and five-year figure (5.99%) are almost identical. The difference between the two fixes is therefore less about the headline rate than about how long you want certainty, what fees you will pay, and how you would cope if rates stay high when a short fix ends.

Start by checking when your current deal ends and whether you can secure a new one early. Mr Harris said a whole-of-market broker can help borrowers reserve a rate several months before they need it. As he put it, if rates rise by the time the mortgage starts, “they will be glad they fixed when they did”, and if rates fall, the borrower “should be able to move onto a cheaper product at that time”.

Compare deals on total cost over the fixed period, including arrangement fees, not just the headline rate. Ask about deals below the average, and read the terms on switching before you commit. If you are a first-time buyer, Bellway said the government’s proposed Your First Home scheme could influence the timing of decisions while buyers wait for details, though no launch date is given in the sources.

Your questions answered

What will mortgage rates do in 2026?

The sources used here do not give a forecast for the rest of 2026, and they do not say whether mortgage rates will go down in 2027. What they show is a rising trend over the past month. Mr Harris said borrowers “should not panic”, while Ms Scholar said the pressures show no sign of abating.

Should I fix for 2 or 5 years now?

There is no single answer. With the two-year and five-year averages almost level, consider how long you want payment certainty, compare total costs including fees, and ask a broker about reserving a rate ahead of your deal ending.

Will mortgage rates drop to 3% again?

Nothing in the sources suggests this. Average fixed rates are close to 6%, and PropertyWire described sub-5% rates as something seen in recent periods. Predicting a return to 3% would be speculation, so we will not make that call.