Sub-5% mortgage deals shrink to 131 as rates climb sharply in September

Deals below 5% nearly wiped out

Mortgage rates rose sharply in September, cutting the number of fixed-rate deals below 5% from more than 1,500 at the start of the month to just 131 by early October, according to Which? analysis of Moneyfacts data. The squeeze follows a calmer August and comes as global instability and rising energy costs unsettle lenders.

At the start of January, borrowers could choose from 750 mortgages with rates below 4%, with the cheapest two-year fixes just shy of 3.5%. By early October, only one sub-4% deal remained on the market. That tracker mortgage is restricted to Barclays Premier customers, who must earn at least £75,000 a year or hold a minimum of £100,000 in savings or investments with the bank to qualify.

Which? says some lenders have begun trimming rates again in the past few days, though it is not yet clear whether this will continue.

Trackers currently cheaper than fixes

For those remortgaging, the lowest two-year fixed rate currently available is around 5%, while the best two-year tracker rate sits just above 4%. Tracker rates move in line with an external benchmark, usually the Bank of England base rate, plus a fixed margin, and have offered the cheapest borrowing since March.

The base rate has held at 3.75% through 2026, after being cut by a full percentage point last year, which benefited existing tracker customers. However, many experts expect the Bank of England’s Monetary Policy Committee to raise the base rate by 0.25 percentage points at its November meeting. Barclays Research forecasts a further 0.25 percentage point rise in early 2027, which would take the base rate to 4.25% by early next year.

What a rate rise would cost

Which? modelled the impact of rising rates on two example mortgages. For a £250,000 mortgage with 25 years remaining, moving from a 4% to a 5% interest rate adds £141 a month, or almost £1,700 a year, to repayments. A further rise from 5% to 6% adds another £150 a month.

For a smaller £200,000 mortgage with 15 years remaining, the impact is less severe, with each percentage point increase adding just over £100 a month to repayments.

Which? notes that anyone considering a tracker should be able to afford their repayments if the rate rises by a full percentage point over the next year or so, and warns that global instability could push rates up by more than currently forecast.

Fees as well as rates

Alongside headline interest rates, Which? points out that upfront fees matter too, with some market-leading deals carrying charges of more than £1,500. It says fee-free deals with slightly higher rates can sometimes work out cheaper overall once the full cost of the mortgage is taken into account.

What happens next

The Bank of England’s Monetary Policy Committee meets in November, with a quarter-point base rate rise widely expected by economists. A further rise is forecast for early 2027. Mortgage rates and the availability of sub-5% deals are expected to continue shifting in response to these decisions and broader economic conditions.