US Politics: Five-Year Fixed Mortgages Reach Highest Level Since 2023 Amid Market Volatility

The average rate for a five-year fixed-rate mortgage has reached its highest point since November 6, 2023, according to the latest data from Moneyfacts. This marks a significant increase from early March of this year, when the average rate stood at 4.94%.

This rise means that borrowers taking out a £200,000 mortgage over 25 years are now facing monthly payments that are £111 higher than they were six months ago. The increase is attributed to higher Sonia swap rates, which lenders use to price fixed-rate mortgages, and is putting pressure on funding costs amid broader financial market volatility.

This development has led brokers to describe the current period as a "dark week for borrowers." All of the UK's major mortgage lenders have increased their rates this week, with many doing so for the second time since the beginning of September. Investors are now anticipating that interest rates, currently held at 3.75% by the Bank of England, could rise to 5% by November of next year, despite the Bank's decision to hold rates steady this week.

Industry professionals are advising individuals whose fixed-rate deals are nearing expiration to act quickly. Ross Lacey, director and independent financial adviser at Fairview Financial Management, suggests that those within six months of their current deal ending should consult a broker to lock in a rate as soon as possible. This strategy can help protect borrowers from future increases, while also allowing them to potentially secure a better deal if rates decrease within the next six months.

The average rates tracked by Moneyfacts encompass the entire residential market, including more specialized products. However, borrowers with stronger financial profiles, such as those with a larger deposit or equity, may be able to secure more favorable rates. For instance, HSBC offers a five-year fixed rate of 4.72% for individuals with a 40% deposit, though it requires a premier current account. More broadly available rates include a 4.77% five-year fix from Barclays for those remortgaging and a 4.74% deal from First Direct for new buyers.

For those with less equity or smaller deposits, securing a rate below 5% is becoming increasingly difficult. Brokers note that these sub-5% rates are rapidly disappearing. Borrowers with 20% equity looking to remortgage may find rates around 5.14% with Coventry Building Society, while First Direct offers a 4.94% rate for new buyers with a 20% deposit.