Average five-year fixed mortgage rate goes over 6%

Economy
By Liam

Typical five-year fixed mortgage rates fall more than 6% for the first time since November as lenders expect more rate hikes from the Bank of England

  • The five-year average with a fixed interest rate is now 6.01%, according to Moneyfacts
  • The two-year fixed rate is now 6.47% after surpassing 6% last month

By Fran Ivens Because this is money

Updated:

According to the latest data, the average interest rate on a five-year fixed-term mortgage has risen above 6 percent for the first time since the mini-budget collapse in November.

Borrowers who take out a five-year fixed rate now pay an average of 6.01 percent, according to Moneyfacts, up from 5.97 percent yesterday.

Before the mini budget, the last time rates were this high was in December 2008.

A month ago, the average interest rate was 5.41 percent, but rates have continued to rise as the Bank of England is expected to continue raising its key rates at least through the end of the year.

Up: Mortgage rates have hit another milestone as the average five-year fix tops 6% for the first time this year

Rates rose dramatically last fall in the wake of then-Prime Minister Liz Truss’s disastrous mini-budget, but fell in the first half of 2023.

However, a combination of stubbornly high inflation and a strong labor market has led the Bank of England to extend this cycle of rate hikes.

For all deposits, the two-year average fixed rate is now 6.47 percent, compared to 5.72 percent on June 5.

On June 22, the Bank’s Monetary Policy Committee voted to raise the base rate from 0.5 percent to 5 percent — the thirteenth consecutive increase.

The expectation of further increases means more pain for mortgage borrowers.

About 1.4 million fixed rate mortgage holders will need to take out a new mortgage this year and will face a mortgage shock as they take out much higher rates than their current loan.

Justin Moy, managing director at broker EHF Mortgages, said: ‘There are still plenty of five-year deals under 6 percent currently available for both residential and buy-to-borrowers.

However, the trend is worrying and swift action to secure a new deal is essential. With more lenders offering an option up to six months before their current deal expires, it’s so important to work with a mortgage broker to see what’s available and make a quick decision.”

Moy adds that there are still some loyalty deals for product transfers that are much cheaper than average rates. For example, Nationwide offers existing customers 5.14 percent fixed for 5 years.

This variety is also reflected in the average rates for different share sizes. For a five-year fixed rate at 60 percent of the property’s equity, the current average interest rate is 5.76 percent.

Last month, the government and mortgage lenders announced a package to help borrowers with rising costs, including a year of repossession protection and the chance to move to an interest-only deal for six months without impacting credit scores.

However, lenders are struggling to get to grips with the details of the new ‘mortgage charter’, leaving mortgage holders in limbo.

Santander, Virgin Money and Lloyds are among the lenders currently implementing the charter. Others include HSBC and Barclays.

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed-rate contract is about to expire, or because they have agreed on a home purchase, should explore their options as soon as possible.

This is Money’s best mortgage interest calculator powered by L&C that can show you deals that match your mortgage and property value

What if I have to borrow again?

Borrowers should compare rates and speak with a mortgage broker and be prepared to trade to secure a rate.

Anyone with a fixed-rate deal expiring in the next six to nine months should research how much it would cost them to re-mortgage now — and consider getting a new deal.

Most mortgage agreements allow fees to be added to the loan and are not charged until it is closed. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I buy a house?

Those with an agreed home purchase should also aim to secure rates as soon as possible so they know exactly what their monthly payments will be.

Homebuyers should be careful not to overextend themselves and be prepared for the possibility that house prices could fall from their current highs, due to higher mortgage rates limiting people’s borrowing capacity.

Compare mortgage payments

The best way to compare mortgage rates and find the right deal for you is to talk to a good real estate agent.

You can use our best mortgage interest calculator to display deals that match your home value, mortgage size, term and fixed interest needs.

However, bear in mind that rates can change quickly, so if you need a mortgage it’s advice to compare rates and then speak to an estate agent as soon as possible so they can help you find the right one mortgage for you.

> Check out the best fixed rate mortgages you can apply for

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