The average interest rate on a new five-year fixed mortgage has hit 6% for the first time in three years, delivering a fresh blow to home buyers and millions of homeowners approaching the end of their current deals.

Figures from the financial information service Moneyfacts show that around 1,500 mortgage deals priced below 5% have disappeared since the start of September. The firm described the situation as "brutal" for borrowers.

The average rate on a two-year fixed mortgage now stands at 5.98%, almost level with the five-year figure.

Highest rates since 2023

The five-year average is at its highest level since September 2023, while the two-year average is at its highest since December 2023. That period followed the mini-budget turmoil of autumn 2022 and a long run of Bank of England rate rises, when many households saw their monthly repayments jump sharply.

The latest increases reflect higher costs for lenders, driven by international concern over rising prices, interest rates and government borrowing costs. Since the Iran war began, global economic uncertainty has been pushing up the price of fixed-rate deals.

Lenders price fixed mortgages largely on the cost of borrowing money on financial markets over two or five years. When investors expect inflation and interest rates to stay higher for longer, those costs rise, and banks pass them on to customers.

High Street lenders move repeatedly

Moneyfacts said the biggest High Street lenders had made repeated increases to fixed rates during September. Barclays raised selected fixed rates on four separate occasions. HSBC, Lloyds Bank, Nationwide, NatWest, Santander and TSB each made three rounds of increases.

The speed of those changes has left many borrowers chasing a moving target. A deal offered at the start of a mortgage application may be withdrawn before it can be secured, forcing buyers to accept a more expensive product or to rethink their plans altogether.

Who is affected

Most homeowners in the UK have a fixed-rate mortgage. The rate on such a deal does not change until it expires, usually after two or five years, at which point a new deal is chosen to replace it.

That means people already locked into cheaper deals are shielded for now. The pain falls on first-time buyers, people moving home and anyone whose fixed term is ending. Many borrowers who fixed when rates were lower will face a significant jump in monthly payments when they come to remortgage.

For a typical household, a difference of one or two percentage points on a large loan can add hundreds of pounds a month to repayments. That comes on top of wider cost of living pressures, including energy bills and food prices.

The wider picture

Rising mortgage costs can also cool the housing market. Buyers who can borrow less may offer less for properties, or delay purchases. Some economists argue that could slow house price growth, though that offers little comfort to people struggling to afford a home in the first place.

There are also concerns for renters. Landlords with mortgages face the same higher costs, and some may seek to pass them on through higher rents.

What borrowers can do

Brokers routinely advise people whose deals are ending within the next six months to look at securing a new rate early, since many lenders allow an offer to be locked in months in advance. Comparing deals across lenders rather than automatically accepting a product transfer from an existing bank can also make a difference.

Whether rates climb further will depend on how markets judge the outlook for inflation and the Bank of England's next moves, as well as developments in the Middle East.

For now, the message from the figures is stark: the era of sub-5% fixed mortgages is fading fast, and for millions of households, borrowing has become markedly more expensive in a matter of weeks.