Five-year fixed mortgage rates hit highest level since Liz Truss mini-budget as 750,000 homeowners face ‘huge shock’

FIVE-year fixed mortgage rates have soared to their highest level since the Liz Truss mini-Budget sparked economic turmoil. Hundreds of thousands of homeowners now face a “huge shock” when their cheap deals expire. New data from moneyfactscompare.co.uk shows the average five-year fixed rate has climbed to 5.91%. That is the highest it has been since October 2023, when mortgage rates spiked in the fallout from the disastrous mini-Budget under the former Prime Minister. Sign up for the Money newsletter Thank you! The average two-year fixed rate also jumped to 5.87%, its highest point since April 21. This came after a wave of major lenders hiked their prices in the space of just one week. Banking giants including NatWest, Santander, HSBC and TSB all pushed up their fixed rates. NatWest increased charges by as much as 43 basis points, while Santander raised them by up to 45 basis points. Halifax, Lloyds Bank and Barclays also raised selected fixed rates. Borrowers with smaller deposits were hit even harder, with the average two-year fixed rate at 95% loan-to-value surging from 6.15% to 6.33%. Rachel Springall, finance expert at moneyfactscompare.co.uk, said: “A wave of mortgage rate hikes swept across the market this week, with fixed rate increases firmly dominating lender repricing.” Springall warned that further rises could be on the way. Most read in Money She said: “Swap rates remain near 30-day highs, so there is still some uncertainty around the future direction of fixed mortgage pricing. “More hikes could be coming if lenders have not yet caught up to higher swap rates.” The Bank of England has estimated that around 750,000 households with fixed rate deals set to expire in 2026 are currently locked into rates below 3%. This means many face a painful jump when they come to remortgage. Springall pointed out that back in February 2022, borrowers could get fixed mortgage deals below 2%. Many homeowners coming off those cheap rates now face a dramatic increase in monthly payments. Springall said moving off these expiring deals “will be a huge shock for borrowers.” That’s why anyone whose current deal is due to expire within the next six months should consider locking in a new rate now rather than waiting. Mark Harris, chief executive of SPF Private Clients, said borrowers have more flexibility than many realise. He said: “Mortgage offers are typically valid for six months, so if you are concerned that rates will rise further, it would be sensible to lock into a new deal ahead of time now.” Crucially, if rates happen to fall before the mortgage completes, most borrowers can switch to a cheaper offer instead, although it is worth checking your lender’s specific rules first. Mr Harris said the decision between a two-year and five-year fix comes down to personal circumstances. He said: “If you would struggle to pay the mortgage were rates to rise, then a fixed rate is a sensible option.” He added that a five-year fix could suit those wanting certainty, particularly as the gap between two and five-year rates is currently unusually narrow. Comment now