Fresh fears for homeowners and buyers as mortgage rates creep back up
Average two- and five-year fixed mortgage rates rose monthly for the first time since February, signaling a new challenge for homeowners and potential buyers.
This increase marks a significant shift in the lending environment after a period of relative stability.
The average two-year fixed-rate mortgage across all deposit sizes rose to 4.98 percent in October from 4.96 percent in September, according to financial information site Moneyfacts, which meticulously tracks market rates at the beginning of each month.
Similarly, the average five-year fixed interest rate also increased, from 5.00 percent in September to 5.02 percent last month.
Moneyfacts attributed these adjustments to “mixed movements” by various lenders in the market.
This trend has also contributed to extending the shelf life of mortgage products; The length of time a deal remains available increased from 17 days in September to 22 days in October. This shows that in the current economic environment, providers are taking a more cautious and dynamic approach.
Moneyfacts said the average shelf life has risen above 20 days for the first time since April 2025, when it was 21 days.
Moneyfacts financial expert Rachel Springall said: “Borrowers may be disappointed to see fixed mortgage rates on the rise.
“Variable swap rates and caution among lenders have led to an abrupt halt to consecutive monthly average interest rate declines.”
“It seems unlikely that the Bank of England will cut base rates any time soon” due to sticky inflation, he said.
Ms Springall added: “It’s not all doom and gloom for borrowers as it shows how much the mortgage market has improved in recent years.
“Borrowers locked into a two-year fixed-rate deal in October 2023 would be paying an average of 6.47 per cent interest, compared to 4.98 per cent now.
“This represents a difference in repayments of £225 per month on a £250,000 mortgage over 25 years.”
Knight Frank Finance managing partner Simon Gammon said: “Inflation has approached double the Bank of England’s 2 per cent target in recent months and consumers’ inflation expectations are starting to rise.
“Both factors have unsettled policymakers and paused the steady decline in mortgage interest rates we have seen since the beginning of spring.
“Lenders have responded cautiously, with some cap rates being higher and the overall average rising slightly.
“This is unlikely to be the start of a sustained rise in borrowing costs, but rather a continuing recession until the outlook becomes clearer.
“This pause is likely to put pressure on housing market activity, which is already showing signs of softening ahead of the November Budget due to speculation about possible changes to property and personal taxes.”
On Monday construction companies Barratt Redrow and Persimmon announced a new 5 per cent deposit scheme backed by Barclays and TSB.
Under the Rezide scheme, home buyers must provide a 5 per cent deposit, while the Rezide equity loan will cover 15 per cent of the market value of the property, up to a maximum loan amount of £100,000.
The remaining 80 per cent of the purchase price will be financed through a mortgage from Barclays or TSB. Various terms and conditions will apply.
Those behind the initiative said the product would initially only be available to buyers of Barratt Redrow and Persimmon homes, with the scheme rolling out across the UK.
They added that the program was designed to support both first-time buyers entering the property market and those looking to move into newly built homes.
