(Image: I-Wei Huang)
Mortgage misery is deepening for homeowners and buyers after the average five-year fixed mortgage rate hit 6% for the first time in three years.
The typical five-year residential mortgage rate on the market reached 6.00 per cent on Monday morning, up from 5.98% on Friday, according to Moneyfacts.
It is the highest average five-year rate recorded since September 27, 2023, when it stood at 6.03%.
The average two-year fixed mortgage rate was also edging towards the 6 per cent mark at 5.98%.
Fixed mortgage rates have been rising in recent weeks as swap rates increase. These are used by lenders to price fixed-rate mortgages.
But borrowers face another problem: the number of fixed-rate mortgages available below 5% has plunged.
Moneyfactscompare.co.uk said there were 1,494 sub-5 per cent fixed-rate deals at the start of September.
By Monday, that had fallen to just nine for borrowers outside Northern Ireland.
Including deals available only to borrowers in Northern Ireland, there were 107 sub-5 per cent fixed-rate products, compared with 1,691 at the start of September.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “The past few weeks have seen pricing margins among major lenders come under immediate pressure from renewed swap rate volatility.
“As wholesale funding costs climb on the back of rising gilt yields, fixed rate adjustments are somewhat inevitable.
“The impact on sub-5 per cent fixed mortgages has been brutal, with around 1,500 deals priced below 5 per cent vanishing since the start of September while average five-year fixed rate has reached 6 per cent, with the average two year not far behind.
“Average fixed mortgage rates have not been above 6 per cent for around three years.”
Buyers face £80,000 mortgage calculator gap
Anyone trying to work out how much they can borrow could also get a very different answer depending on which mortgage calculator they use.
Research by Newspage found an £80,000 gap between the borrowing figures given to the same prospective buyer by different calculators.
Seven mortgage calculators were tested on October 6 using the same example: a 30-year-old first-time buyer earning £40,000, with a £10,000 deposit and looking at a £200,000 property.
The buyer would need to borrow £190,000.
Yet the calculators produced figures ranging from £160,000 to £240,000.
Barclays said the buyer could borrow £160,000, while Nationwide's Helping Hand gave a figure of £240,000.
That's an £80,000 difference.
MoneyHelper gave a figure of up to £200,000, while TSB, Lloyds, Halifax and HSBC all gave £179,600.
Some calculators therefore suggested the £200,000 property was affordable, while others indicated it was not.
Brokers warn calculators are only a 'rough guide'
Brokers said the huge difference does not necessarily mean any of the calculators are wrong.
Instead, lenders use different affordability models, income multiples and approaches to risk.
They also warned that calculators may not fully account for bonuses, overtime, self-employed earnings, second jobs, existing debts or past credit problems.
Pete Mugleston, mortgage adviser and managing director at onlinemortgageadvisor.co.uk, said: "No standalone calculator can offer 100 per cent certainty.
“The reality is that 100+ lenders vary wildly across generosity, acceptable income types, age, credit history, and property criteria.
“While multiplying income by 4x up to 7x gives a rough starting point, standard calculators quickly fall over for anyone with variable income, credit blips, or existing debts.
“Crucially, definitive decisions sit behind an application wall with each lender, and applying to dozens of lenders isn't realistic.”
He added that around a third of deals are broker-exclusive.
Craig Fish, director at Lodestone Mortgages, said lenders are not “wrong” but simply have different criteria.
He said: “An £80,000 gap for the same buyer on the same salary tells you all you need to know about online calculators.
“Every lender runs its own affordability model, with its own view on income multiples, outgoings and stress testing.”
He said Nationwide's Helping Hand is designed to stretch borrowing for first-time buyers, while Barclays takes a more cautious approach in the example.
“Calculators are a rough guide and nothing more,” he said.
Matt Coulson, founder at Heron Financial, said: “That £80,000 gap looks alarming, but it's not a malfunction.
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“Each calculator is giving you that lender's honest answer, and lenders genuinely assess the same person very differently.”
He added: “The one real mistake is treating any single number as what you can borrow, because your figure depends entirely on which lender you approach.”
Jinesh Vohra, chief executive of app Sprive, said: “The average five-year mortgage rate hitting 6% is a stark reminder of how quickly the cost of borrowing can change, and for homeowners coming off a fixed deal, the jump in monthly payments could be significant.”