The average five-year fixed mortgage rate has reached six per cent, a level not seen in three years, after several lenders increased their prices. Moneyfacts reports that the typical five-year agreement now stands at six per cent, with the average two-year rate close behind at 5.98 per cent.
This marks the highest point for the five-year rate since September 2023 and for the two-year rate since December 2023. Lenders have adjusted their rates in response to renewed inflationary pressures affecting global economies.
Barclays has raised selected fixed rates on four occasions, while HSBC, Lloyds, Nationwide, Natwest, Santander, and TSB have each implemented three rounds of increases. Rachel Springall, a finance expert at Moneyfacts, described the rise as "disastrous news for borrowers."
The volatility in the market is linked to the re-pricing of swap rates, which influence fixed-rate mortgage pricing and reflect expectations for future interest rates. The Bank of England has maintained rates at 3.75 per cent, though economists anticipate a potential hike.
Lenders are reassessing how the Bank of England might respond to economic shocks. The central bank's Decision Makers' Panel survey indicated increased one-year ahead inflation expectations, rising to 3.3 per cent from 3.1 per cent in August, with longer-term expectations also edging higher.
Interest rate-setter Dave Ramsden stated last week that inflation risks have "tilted more to the upside" since the Bank's September decision. Ramsden, who voted to keep rates unchanged, noted that if "upside pressures on the inflation outlook continue to build, there could be a case for increasing Bank Rate."