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Average mortgage rates rise: should you be concerned?
We break down what's happening to rates and what it means for borrowers
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Average mortgage rates have risen month-on-month for the first time in eight months, according to Moneyfacts. So should consumers be concerned?
The average two-year and five-year fixed rates edged up slightly in October, ending a run of steady declines since February. It’s a small change, but one that may leave borrowers wondering whether rates are on the rise again.
In short, they are not. Average rates show market trends, but borrowers don’t get the average rate – you choose the best deal for your circumstances. That’s why we’ve looked at how the best deals have changed and asked experts whether rates could climb further.
Read on to see what’s really happening to mortgage deals.
What's happening to mortgage rates?
Moneyfacts analysis shows the average two-year and five-year fixed-rate mortgage rose by 0.02 percentage points in October – a small increase, but one that ends eight months of steady declines.
Three-year fixed rates moved in the opposite direction, falling by 0.02 percentage points between September and October.
Average rates help to show how the market is shifting overall, but what really matters is whether the best deals are rising – especially across different loan-to-value (LTV) ratios and borrower types.
The tables below show how the best rates have changed for home movers, remortgagers and first-time buyers between September and October.
Home movers
| LTV | Term | September rate | October rate | Change |
|---|---|---|---|---|
| 60% | Two-year fix | 3.78% | 3.80% | +0.02 |
| 60% | Five-year fix | 3.90% | 3.97% | +0.07 |
| 75% | Two-year fix | 3.84% | 3.94% | +0.10% |
| 75% | Five-year fix | 3.99% | 4.04% | +0.05% |
| 85% | Two-year fix | 3.94% | 4.08% | +0.14% |
| 85% | Five-year fix | 4.9% | 4.20% | +0.11% |
Source: Moneyfacts. Data collected on 14 October and 10 September.
For home movers, the best rates increased most at higher LTVs, with five-year fixes rising slightly more than two-year deals.
Remortgage
| LTV | Term | September rate | October rate | Change |
|---|---|---|---|---|
| 60% | Two-year fixed | 3.74% | 3.74% | No change |
| 60% | Five-year fixed | 3.85% | 3.95% | +0.10% |
| 75% | Two-year fixed | 3.93% | 3.94% | +0.01% |
| 75% | Five-year fixed | 3.95% | 4.02% | +0.07% |
| 85% | Two-year fixed | 4.21% | 4.20% | -0.01% |
| 85% | Five-year fixed | 4.14% | 4.15% | +0.01% |
Source: Moneyfacts. Data collected on 14 October and 10 September.
For those remortgaging, two-year fixed rates have remained largely unchanged since mid-September, while five-year deals have edged up slightly.
First-time buyers
| LTV | Term | September rate | October rate | Change |
|---|---|---|---|---|
| 80% | Two-year fixed | 3.90% | 3.98% | +0.08% |
| 80% | Five-year fixed | 4.09% | 4.16% | +0.07% |
| 90% | Two-year fixed | 4.26% | 4.34% | +0.08% |
| 90% | Five-year fixed | 4.32% | 4.39% | +0.07% |
| 95% | Two-year fixed | 4.68% | 4.74% | +0.06% |
| 95% | Five-year fixed | 4.74% | 4.78% | +0.04% |
Source: Moneyfacts. Data collected on 14 October and 10 September.
The lowest rates for first-time buyers all increased at the LTVs analysed, with rises similar across both two-year and five-year fixes.
- Head to our page to find the best mortgage rates. Rates are updated daily.
What do mortgage experts expect next?
The good news is that experts don’t expect mortgage rates to rise significantly in the coming months. Instead, they’re likely to hover around current levels, with only small fluctuations either way.
Nicholas Mendes, of mortgage broker John Charcol, says: 'Unless there is a marked change in inflation or Bank of England policy expectations, we are likely to see mortgage rates hover close to current levels, with scope for gentle easing later in the year if economic data softens.'
Simon Gammon, of Knight Frank Finance, adds that the slight uptick in average rates 'is unlikely to mark the start of a sustained rise in borrowing costs, but rather a prolonged plateau while the outlook becomes clearer'.
That plateau is reflected in recent Moneyfacts data, which shows the average two-year and five-year fixed rates have remained stable over the past two weeks, at 4.98% and 5.02% respectively.
David Hollingworth, of L&C mortgages, said: 'It’s still expected that interest rates will continue to fall over time, but there’s been a bigger question mark around how quickly those cuts may come. The Bank of England has continued to add a cautious tone over how quickly it might apply further cuts and wants to be sure that inflation is on the right path.
'It may be disappointing that rates have notched up, but it's by small amounts and isn’t likely to be a signal of deals rocketing. In fact, rates today are still far healthier than they were only a couple of years ago. Depending on how the economic outlook plays out, we may just see rates shifting very slightly up and down until the direction of future rate movements becomes clearer.'
- Find out more: what's happening to the base rate?
Why do lenders increase rates?
There are several reasons lenders may raise mortgage rates. In this case, it has become slightly more expensive for them to offer fixed-rate deals, and that cost is being passed on to borrowers.
Sometimes, lenders also increase rates when a market-leading deal attracts more applications than they can process. Raising the rate temporarily helps them manage demand and reduce backlogs.
In other cases, lenders set a limit on how many mortgages they’ll offer at a specific rate. Once that quota is reached, the deal is reviewed and the rate may be adjusted upwards.
