The number of sub-5% fixed mortgage deals has collapsed by 99% since the beginning of September as lenders continue to push up rates.
Just nine fixed deals priced below 5% remain, excluding products available exclusively in Northern Ireland, compared with 1,494 at the start of last month, according to Moneyfactscompare.co.uk.
At the same time, the average 5-year fixed mortgage rate has reached 6.00% – its highest level since late September 2023.
The average 2-year fix has climbed to 5.98%, its highest since mid-December 2023.
LENDERS REPRICE
Moneyfacts said the country’s biggest mortgage lenders repeatedly increased fixed rates during September as swap rate volatility and higher wholesale funding costs put pressure on pricing.
Barclays increased selected fixed rates on four occasions, while HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB each made three rounds of increases.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “The past few weeks have seen pricing margins among major lenders come under immediate pressure from renewed swap rate volatility.
“As wholesale funding costs climb on the back of rising gilt yields, fixed rate adjustments are somewhat inevitable.
“The impact on sub-5% fixed mortgages has been brutal, with around 1,500 deals priced below 5% vanishing since the start of September while the average five-year fixed rate has reached 6%, with the average two-year not far behind.”
VARIABLE OPTIONS
Variable rate availability below 5% has proved considerably more resilient.
Moneyfacts recorded 389 sub-5% variable deals, excluding Northern Ireland-only products, compared with 411 at the beginning of September.
Including Northern Ireland-only products, there are 107 fixed mortgage deals below 5%, down from 1,691 – a 94% reduction.
Springall said the contrasting trends could lead more borrowers to consider variable products, including base rate trackers without early repayment charges.
She added: “Borrowers who were hoping mortgage rates would stabilise will be disappointed.”
AFFORDABILITY PRESSURE
Ian Harris, President of NAEA Propertymark, said the rapid withdrawal of cheaper fixed rates would put further pressure on buyers.
He said: “We are seeing first-hand how sensitive buyers are to mortgage rates, and the rapid disappearance of sub-5% deals will inevitably add further pressure to affordability.
“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.
“Equally, homeowners coming off fixed-rate deals may face significantly higher repayments, which could affect their decision to move.”
Harris added that realistic pricing and financial preparation would become increasingly important, while greater stability in mortgage pricing would help restore confidence.
