Average five-year fixed-rate mortgage rises closer to 6% in further blow to homeowners

The typical five-year fixed-rate deal is now 5.94% - a further blow to homeowners struggling to secure new deals

The average five-year fixed-rate homeowner mortgage is edging closer to 6%, according to Moneyfactscompare.co.uk (Gareth Fuller/PA) (PA Archive)

The average five-year fixed-rate homeowner mortgage is edging closer to 6% in a further blow to struggling homeowners looking to agree deals.

Across all deposit sizes, a typical five-year fixed-rate residential mortgage on the market on Thursday had a rate of 5.94%, up from 5.91% on Wednesday, Moneyfactscompare.co.uk said.

The last time the average five-year fixed-rate residential mortgage was above 6% was on November 21 last year, according to the website’s data.

The average two-year fixed residential mortgage rate on Thursday was 6.37%, up from an average of 6.30% on Wednesday.

Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “The uncertainties surrounding mortgage interest rates will be a concern for borrowers who are about to come off a fixed-rate deal, or indeed those who are sitting on a standard variable rate (SVR).

“There are still some competitive deals for borrowers to choose from, so it’s vital they seek advice to go over their options.

“Those still locked into a low fixed-rate would be wise to consider overpaying on their mortgage if they can, to reduce the term of their deal.”

Average two-year fixed-rate mortgages went as high as 6.65% in October last year amid market volatility following the mini-budget last autumn.

Mortgage rates later started to settle, but the average two-year fixed-rate mortgage topped 6% once more earlier in June, for the first time in 2023.

Rates on deals have been on the increase again amid expectations that interest rates will need to stay higher for longer as the Bank of England tries to subdue sticky inflation.

Around 2.4 million fixed-rate deals are due to end between now and the end of 2024, according to figures from UK Finance.

Moneyfacts said the choice of mortgage products edged up slightly on Thursday, with 4,430 residential mortgage products available, up from 4,407 on Wednesday.

Meanwhile, financial technology firm Twenty7tec said this week has been the busiest it has seen this year so far for remortgage searches, after the Bank of England increased the base rate on Thursday last week.

Director Nathan Reilly said: “The weeks on either side of a Bank of England rate rise are always busy times in the market.”

He said that, as lenders change rates, “we amend them within record time to make sure that advisers are giving customers the best advice and the best prices available”.

He added: “In the run-up to the day itself, a lot of mortgage searches and, in particular this time, remortgage searches take place as people try and secure a rate ahead of the predicted rise.

“But it’s also busy the week after as customers adjust to new products and rates in the market.”

A new mortgage charter has been agreed by lenders representing around 85% of the mortgage market, following a meeting between Chancellor Jeremy Hunt and banks on Friday last week.

Under the charter, lenders will allow customers who are up to date with their payments to switch to interest-only payments for six months or extend their mortgage term to reduce their monthly payments.

Borrowers will have the option to revert to their original term within six months by contacting their lender.

A borrower will not be forced to leave their home without their consent, unless in exceptional circumstances, in less than a year from their first missed payment.