Fixed Mortgage Rates Near 6% as the Bank Holds and House Prices Stall

The Bank Held at 3.75%, but Three Members Voted to Raise

On 17 September the Bank of England's Monetary Policy Committee voted 6 to 3 to keep the base rate at 3.75%. It was the sixth hold of 2026. As in July, the three dissenters (Megan Greene, Catherine Mann and Huw Pill) voted to raise the rate to 4%, not to cut it.

Energy is the main reason. The Bank said protracted conflict in the Middle East had pushed energy prices up again since its July meeting: Brent crude rose 36% over that period and UK wholesale gas 78%. Inflation had already risen to 3.1% in August, up from 2.9% in July, mostly because of fuel. The ONS reported that petrol rose 9.1p a litre in a single month to its highest price since November 2022, and diesel rose 14.2p.

On energy prices as they stood in mid-September, the Bank now expects CPI inflation to reach slightly above 4% in the first quarter of 2027. The Committee said the risks to that outlook are tilted to the upside, more so than in July, and the minutes record that if the conflict persists for an extended period, policy may have to tighten. That's a long way from the rate cuts many borrowers were hoping for at the start of the year.

Fixed Rates Climb Towards 6%

Fixed mortgage rates are priced off what markets expect the base rate to do over the next few years, so the prospect of a rise is already in today's deals. According to Moneyfacts figures reported on 2 October, the average two-year fixed rate is now 5.96% and the average five-year fix is 5.98%. The two-year average is at its highest since June 2024, and the five-year at its highest since September 2023.

In February the average two-year fix was 4.85%. On a £250,000 repayment mortgage over 25 years, that difference works out at roughly £1,605 a month now against £1,440 then, about £165 a month more. Rightmove's own tracker, which uses a different basket of deals, shows a lower average of 5.29% for September, up from 5.09% in August. The level differs between the two measures, but both are still going up.

Mortgage Approvals Fall Again

Last month we reported that approvals had hit a two-year low. They fell further in August. The Bank of England's Money and Credit release on 29 September showed 54,900 mortgage approvals for house purchase, down from 56,100 in July and the fewest since December 2023. It's the fourth month in a row below 60,000, and about 16% fewer than in August 2025.

Remortgage approvals also slipped, to 34,000 from 34,600, and gross mortgage lending dropped to £23.6bn from £25.3bn. One figure went the other way: consumer credit borrowing rose to £2.5bn, with £1.2bn of that on credit cards, up from £0.9bn in July. Richard Pinch of Broadstone said households are increasingly relying on credit cards to cover everyday costs, which points to tighter budgets rather than confidence.

House Price Growth Halves

Nationwide's index, published on 1 October, showed annual price growth halving to 0.8% in September from 1.6% in August, the weakest rate since December 2025. The average price fell to £274,251 from £275,465 the month before. Nationwide's chief economist, Robert Gardner, linked the slowdown to the uncertain economic backdrop, with higher energy prices raising expectations of a base rate rise and keeping mortgage rates moving up.

Asking prices tell a slightly different story. Rightmove reported a 0.7% rise in September to £367,440, the first increase since May, as buyers and sellers came back after a quiet summer. Even so, asking prices are 0.8% lower than a year ago and 2.3% below where they were at the start of summer, and sellers are still competing with the most homes for sale in 12 years. HM Land Registry's index, which records completed sales and so runs a couple of months behind, put the UK average at £273,000 in July, up 1.4% on a year earlier.

Where Prices Are Still Rising

The north and south of the country are still moving apart. Land Registry figures for July show London prices down 3.3% on a year earlier, the eleventh month in a row of falls, while the North East grew 4.9%. Nationwide's quarterly regional data, which covers the three months to September, tells a similar story, with Northern Ireland and the North West well ahead and East Anglia the one region where prices are lower than a year ago. Flats are the weakest property type on both measures.

A New Scheme for First-Time Buyers

On 26 September the government announced a new first-time buyer scheme for England called Your First Home. Buyers would put down a 2.5% deposit and take a government-backed equity loan of 20% of the price, with an interest-free period at the start. That means a smaller mortgage than a 95% deal would need, so monthly payments could be noticeably lower.

There are limits. It only applies to new-build homes from developers signed up to the scheme, and there will be a household income cap and local property price caps. Those caps, the length of the interest-free period, and the date it opens will all be set out at the Budget on 28 October. The scheme isn't open yet, so if you're saving for a first home, don't change your plans until the detail is published.