The Bank of England held its base rate at 3.75% in September, yet mortgage markets were already pricing a different direction. Three of the Bank’s nine rate-setters wanted a rise, while lenders were lifting fixed rates as their own funding costs increased.
On Monday 5 October 2026, the average five-year fixed mortgage deal in Britain reached 6 per cent for the first time in more than three years. The threshold was reached in both residential and buy-to-let lending.
Rachel Springall, a finance expert at Moneyfacts, said the increases had become inevitable because higher gilt yields had raised lenders’ wholesale funding costs.
The shift has left little room for borrowers seeking a cheaper fixed deal. Moneyfacts recorded just nine products below 5 per cent, down 99% from 1,494 at the start of September 2026.
Bond markets have driven the change. On Thursday, the yield on Britain’s 30-year government bonds moved above 6% for the first time since 1998. The UK’s 2-year Sonia swap rate, a benchmark used in mortgage pricing, has risen by 27 basis points over the past month to 4.68%.
Barclays raised selected fixed rates on four occasions during September. HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB each made three rounds of increases during the month.
The average five-year fix was last at 6 per cent on 27 September 2023, when it stood at 6.03 per cent. It remained at 6 per cent or above from 4 July to 27 September 2023, peaking at 6.37 per cent in early August.
Average two-year fixes are now at 5.98 per cent, their highest level since September 2023.
About half a million homeowners need a new mortgage deal in the final three months of 2026. For a £250,000 mortgage, the higher rates amount to about £165 a month more than in February.
The Bank of England expects inflation to pass 4% early next year. It projected in July that over 5 million households would likely see mortgage repayments increase by the end of 2028.
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