Fixed rate mortgage deals have got more expensive month on month for the first time since February in an ominous new trend for homeowners.
Although the increases are small the turnaround marks an unwelcome new direction for the home loans market after rates fell through most of 2025 on anticipation of a succession of rate cuts from the Bank of England.
However, those hopes have had to be reined in because of a new spike in inflation over recent months. It is expected to peak at around 4%, twice the Bank of England’s 2% target.
According to analysts Moneyfacts average rates on two and five year deals both rose by 0.02% to 4.98% and 5.02% respectively in October. The last month-on-month rate rise was recorded as long ago as the start of February.
Since then rates have drifted downwards with headline offers falling well below 4% for borrowers with the biggest deposits.
At the start of October last year, the average five-year fixed rate was 5.07%; just 0.05% higher than the current rate.
However, the average two-year fixed rate has fallen by 0.42% over the same period, down from 5.40% to 4.98%.
The new uptick in rates will be particularly unwelcome for those borrowers still benefitting from very low rates available on five year deals in late 2020 and early 2021 who face remortgaging soon,
Fixed rate mortgages have to be refinanced at the prevailing market rate when they reach the end of their term.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers may well be disappointed to see fixed mortgage rates on the rise.
“Volatile swap rates and a cautionary approach among lenders have led to an abrupt halt in consecutive monthly average rate falls.”
She added: “Inflation is expected to peak at 4%, which would then be double the desired 2% target, so any imminent base rate cuts by the Bank of England seem unlikely.
However, even with the three base rate cuts since the start of 2025, fixed mortgage rates can move up regardless, such as in reaction to volatile swap rates.
“It is not all doom and gloom for borrowers, as the mortgage market has shown how far it has improved over recent years. Borrowers who locked into a two-year fixed rate deal back in October 2023 would have been paying 6.47% in interest on average, compared to 4.98% now. That is a difference of £225 per month in repayments on a £250,000 mortgage over 25 years.
“The repercussions of rising fixed rates and subdued sentiment stifle the Government’s push for lenders to do more to boost UK growth. However, even with a slight dip in product choice across the mortgage spectrum, the combined quantity of deals available to borrowers with a 5% or 10% deposit or equity stands at a 17-year high.
“The relaxation of loan-to-income rules is a positive step for improving mortgage affordability challenges, but first-time buyers are still waiting for more affordable housing to be built. “
“Whether purchasing or refinancing, it remains essential borrowers seek independent advice to navigate the mortgage maze and not feel pressured to secure a deal because of the Budget rumour mill.”
Simon Gammon, Managing Partner at Knight Frank Finance, said: “Inflation has crept close to double the Bank of England’s 2% target in recent months, and consumers’ inflation expectations have started to rise. Both factors have unsettled policymakers and paused the steady decline in mortgage rates we’ve seen since early spring.
"Lenders have responded cautiously, with some edging rates higher and the overall average ticking up slightly. This is unlikely to mark the start of a sustained rise in borrowing costs, but rather a prolonged plateau while the outlook becomes clearer. The pause is likely to weigh on housing market activity, which was already showing signs of softening ahead of the November Budget amid speculation about potential changes to property and personal taxation.
"That said, some of the most competitive fixed-rate products remain available around 3.8%, and now may be a sensible time to lock in. If rates improve later, most borrowers can renegotiate before completion, so it’s worth securing a good deal while it’s on the table.”
