📌 THIS WEEK IN BRIEF:

The Bank of England has not changed Bank Rate since December 2025, and it held at 3.75% on 17 September. Fixed mortgage rates have climbed all the same. Moneyfacts recorded an average five-year fix of 6.00% on 5 October, with the two-year at 5.98%. On 8 September the two figures were 5.70% and 5.65%.

On a £250,000 repayment mortgage over 25 years, the 5.96% average two-year rate Moneyfacts recorded on 2 October means payments of about £1,605 a month. That is £165 more than at the start of February, when the average was 4.85%.

Lenders repriced again and again. Moneyfacts counts four rounds of selected increases at Barclays in September, and three each at HSBC, Lloyds, Nationwide, NatWest, Santander and TSB. About 1,500 deals priced below 5% have gone since the start of September. Not every move was upward: NatWest, Skipton and Santander cut selected rates, by up to 0.22, 0.29 and 0.16 points.

Fixed rates follow swap rates, which follow where markets think Bank Rate is heading. HomeOwners Alliance reports that markets now price around four quarter-point rises by the end of 2027. Forecasters expect fewer. Capital Economics, Oxford Economics and Bank of America each look for two, in November and February, taking Bank Rate to 4.25%.

The gilt market moved the same way. On 29 September the Treasury sold new 10-year gilts at the highest yield on any issue of that maturity since 1999. On 1 October the 30-year yield touched 6.029% and the 10-year about 5.5%. Bloomberg noted that the UK had become the first G7 economy to pay 6% on long-term borrowing since the 2012 euro crisis. Yields eased as oil prices paused, and on 6 October the 10-year stood at 5.40% and the 30-year at 5.93%. Bank of England policymaker Catherine Mann said on 1 October that the rise in borrowing costs since the Middle East conflict began reflects investors expecting more inflation, and possibly a premium for uncertainty about Bank policy.

Housing demand is feeling it. Nationwide put annual growth at 0.8% in September, down from 1.6%, with prices 0.2% lower on the month at an average of £274,251. Bank of England figures show net approvals for house purchase at 54,900 in August, against a six-month average of about 60,100, while the average rate on newly drawn mortgages rose to 4.60% from 4.45%. Nationwide's chief economist, Robert Gardner, sees a brighter side: house prices have lagged earnings for some time, so affordability is improving, and activity should recover if the energy shock fades and market rates fall back toward pre-conflict levels.

First-time buyers: Rates are the squeeze, more than prices. Prices are growing slower than earnings, but the average fixed rate is near 6%. Your First Home, the new equity loan for new-build homes, still has no confirmed income cap, local price caps or launch date. Those arrive at the Budget on 28 October, so plan around today's rates.

Remortgaging in the next six months: Lenders have been withdrawing and repricing deals within days. HomeOwners Alliance advises booking a rate through a broker and keeping it under review, since a broker can usually switch you if a better deal appears before you complete.

Landlords: Buy-to-let pricing follows the same swap rates. If you refinance this winter, check your rent cover against a rate above today's average, not at it.

Inflation was 3.1% in August. The Bank of England expects about 3.75% in the final quarter of this year and slightly above 4% in early 2027, and Ofgem's price cap rose 4% on 1 October to £1,723 for a typical bill.

Growth held up: GDP rose 0.4% in July and was 1.6% higher than a year earlier. The jobs market is softer. Unemployment was 4.9% in the three months to July, payrolled employees were down 145,000 on the year, and vacancies of 702,000 were the lowest outside the pandemic since 2014. Regular pay rose 3.5%, with private sector pay up 2.9% and public sector pay up 6.3%.

Public finances add pressure. Net debt was 93.8% of GDP (£2,985.5bn) at the end of August. Borrowing from April to August was £77.3bn, £8.1bn above the Office for Budget Responsibility's forecast, and central government debt interest was £50.0bn, £2.0bn above forecast. New OBR forecasts arrive with the Budget on 28 October. The pound is near a three-month low at about $1.32.

Edition 30 (1 October), we said: reserve a rate rather than wait for the new first-time buyer scheme, because the scheme does nothing about borrowing costs.

What happened: The call held. The average two-year fix went from 5.63% (7 September, the figure we printed) to 5.98% on 5 October, and the five-year from 5.68% to 6.00%. The Budget and the 5 November decision are still ahead, so the direction is not settled.

How private credit stress reaches your street.

The data this week points both ways. Fitch's trailing 12-month US private credit default rate reached a record 6.3% at the end of August, up from 6.1% in July. Global corporate bond spreads widened about 5 basis points in the week to 2 October, the most since March. Blue Owl's two non-traded funds received about $4.2bn of redemption requests for the third quarter, down from $4.7bn in the second, and both capped payouts at 5%. On the other side, Federal Reserve Governor Lisa Cook said on 1 October that private credit does not currently appear to have a big effect on financial stability, though more data is needed.

For UK housing the link is mostly indirect. The Bank's Financial Policy Committee said in September that risk-taking in parts of private and risky credit markets remains elevated and vulnerable to tighter financing, and its stress test of private markets is under way. UK bridging and development loan books were £13.4bn at the end of 2025, against mainstream mortgage lending above £300bn a year. The February collapse of bridging lender Market Financial Solutions, where creditors allege a shortfall of more than £1.3bn, has had a limited effect on UK financial stability so far, the Bank said in July. Non-bank lenders hold around 45% of outstanding UK commercial real estate debt, and UK banks have an estimated £173bn of exposure to private market funds and highly leveraged companies.

Sources: Fitch, Bloomberg, Reuters, Bank of England, Bridging and Development Lenders Association.

Government bond yields beyond the UK (10-year, peak this week):

These are four large markets, not every country.

What is happening: A global sell-off in government bonds took yields to multi-year highs on 1 October, driven by concern about oil prices, inflation and government borrowing.

Why it matters: Lenders reprice fixed mortgages as swap rates move, usually within days. The Budget on 28 October, with new OBR forecasts, is the next test for gilts.

Data: Moneyfacts (5 Oct), Nationwide, Bank of England, ONS, Land Registry

The Bank of England estimates that 750,000 households whose fixed rate ends this year pay below 3% today and will face about £170 more a month on average.

Nationwide's third-quarter data again puts Northern Ireland top of the UK table. Prices averaged £227,922, up 5.9% on a year earlier and 0.5% on the quarter. That is slower than the 8.6% annual rise in the second quarter, but Nationwide says it remained the strongest region by a healthy margin.

For comparison, England averaged £311,428, up 0.5% on the year and down 0.7% on the quarter. Scotland rose 3.3% and the North West 3.9%, while Wales rose 0.7%. Eight of Nationwide's thirteen regions saw annual growth below 1%, four of them with small falls, the weakest being East Anglia at -0.7%.

Nationwide does not name a single cause for Northern Ireland's lead. Most regions slowed in the quarter, and Northern Ireland did too.

Next edition: the North East.

The 6.00% headline averages every loan-to-value band. In Moneyfacts' July report the average two-year fix was 4.97% at 60% LTV, 5.52% across all deals and 6.13% at 95% LTV. Your band matters as much as the month.

Compare total cost, not only the rate. Mortgage Advice Bureau's 7 October table lists the cheapest 60% LTV two-year deals from 4.90% before fees, and the Halifax deal at that rate carries a £1,099 fee.

Send questions to [email protected]

This week: "The 30-year gilt yield hit 6% and now the average five-year mortgage is 6%. Are the two connected?"

Related, but the match at 6% is a coincidence. Lenders price fixed mortgages from swap rates, which follow where markets expect Bank Rate to go over the next two to five years, plus a margin. The 30-year gilt yield measures what investors want for lending to the government for three decades, which depends more on government borrowing and long-term inflation expectations. Both rose this week for shared reasons: higher oil prices, inflation worries and talk of Bank Rate rises. They move in the same direction without being the same number.

Educational only. Not financial advice. Always consult an FCA-regulated broker.

1. Average five-year fix reaches 6%. Moneyfacts recorded 6.00% on 5 October, the highest since September 2023, with the two-year at 5.98%. (Moneyfacts via Mortgage Strategy and HomeOwners Alliance, 5 October 2026)

2. 30-year gilt yield touches 6.03%. The highest since early 1998, reached on 1 October as US, German and Japanese yields also climbed. (LSEG, Bloomberg, 1 October 2026)

3. Your First Home: analysts weigh the Help to Buy record. Peel Hunt found new-build prices rose 64% over Help to Buy's life against 67% for existing homes, with no link between local take-up and price growth. Income caps, price caps and developer fees follow at the Budget. (Peel Hunt via Trustnet, 28 September 2026)

Model your current payments and what a further rise would mean for your monthly budget.

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