October Market Watch: Why are mortgage rates rising again?

Key takeaways

• Mortgage rates have risen sharply. Average two-year fixed rates are approaching 6%, while five-year fixes briefly crossed that threshold earlier this month.
• Homeowners coming off older fixed deals are feeling the squeeze. Some borrowers are moving from rates of just 1-2% to rates above 5%.
• Tracker mortgages are attracting more interest. Some are currently considerably cheaper than fixed-rate alternatives, although repayments could rise if the Bank of England increases its Base Rate.
• Buyers could have more negotiating power. With fewer property viewings and sellers increasingly accepting offers below asking price, some buyers are finding opportunities despite higher borrowing costs.
• Some lenders are cutting rates again. HSBC and NatWest are among the lenders announcing reductions to selected mortgage deals, although borrowing costs remain significantly higher than earlier this year.

What are the current UK mortgage rates?

After a period of relative stability, UK mortgage rates have taken another turn upwards. The average two-year fixed mortgage rate is now 5.97%, up from 5.68% a month ago. Meanwhile, the average five-year fixed rate has eased slightly to 5.99%, after crossing the 6% mark earlier in October for the first time in nearly three years.

However, some lenders are now beginning to reduce their rates again, offering a little relief to borrowers after weeks of increases.

Rates accurate as of 15th October 2026, sourced from RightMove.

It's worth remembering these are average rates across the market, not necessarily what you'll pay. More competitive deals may be available depending on your deposit, circumstances and the type of mortgage you're looking for.

Why do mortgage rates keep rising?

The ongoing conflict in the Middle East has pushed up oil and energy prices, adding to inflation concerns and increasing expectations that the Bank of England could raise interest rates in the coming months.

If you’ve been keeping up to date with our Market Watches, you’ll know that the Bank of England hasn’t changed its Base Rate of 3.75% since December 2025. 

Unfortunately, fixed mortgage rates don't move solely in response to the Base Rate. They're also influenced by swap rates, which reflect financial markets' expectations of where interest rates are heading. And right now, there's a lot of uncertainty about what comes next.

The latest International Monetary Fund (IMF) also forecasts the UK’s inflation rate to average at 3.3% in 2026 and 2.8% in 2027.

In other words, inflation remains a concern. And if markets expect the Bank of England to raise interest rates to tackle it, that can push up fixed mortgage rates before the Bank actually makes a move.

Are some lenders cutting mortgage rates?

Despite the recent increases, there are some encouraging developments for borrowers.

Lenders including HSBC and NatWest have announced reductions to selected fixed-rate mortgage deals from 15 October. NatWest's updated range is set to include a two-year fixed deal at 5.04% and a five-year fix at 4.98%, bringing another option back into the sub-5% mortgage market.

That's welcome news, but it doesn't necessarily mean mortgage rates are about to fall across the board. Swap rates remain elevated, and further Bank of England rate rises are still a possibility. For now, the cuts suggest some lenders are becoming more competitive, even while the wider outlook for mortgage rates remains uncertain.

What does this mean for buyers?

August saw the average number of viewings per property fall to just 1.7, compared with nearly 4 viewings per property two years earlier - a decline of 57%. The latest Royal Institution of Chartered Surveyors (RICS) survey also reported a continued decline in buyer enquiries in September, suggesting demand is weakening.

But here's where things get interesting for buyers.

86% of estate agents reported properties selling below their asking price, suggesting that sellers are increasingly having to adjust their expectations to secure a sale, something our mortgage experts are seeing first-hand.

We’re now seeing buyers return after their previous purchases fell through, having secured offers on new properties below their asking prices. While mortgage rates are higher, the lower purchase prices are helping to offset some of those additional borrowing costs. 

Of course, this won't be the case everywhere. Property prices and negotiating power vary considerably depending on location and demand.

TOP TIP 💡

Found a property you love? Before making an offer, speak to a mortgage broker to understand how different purchase prices could affect your monthly repayments. You might have more room to negotiate than you think.

What's happening to homeowners who need to remortgage?

While first-time buyers are getting to know the market as it is today, homeowners approaching the end of an existing mortgage deal face a different challenge, particularly those who secured a five-year fixed mortgage during the pandemic when rates were historically low.

With nearly two million fixed-rate mortgage deals expected to expire in 2026, many households are now facing the prospect of remortgaging at rates of 5% or more.

Our mortgage experts are seeing growing concern among homeowners, with some rushing to secure a new deal before rates potentially rise further, while others are looking for ways to manage higher monthly repayments.

If you're worried about higher mortgage repayments, here are a few options worth considering:

• Compare mortgage deals across the market. Your existing lender might not offer the most competitive rate, so it's worth exploring what other lenders have available. Remember to factor in any product fees, not just the interest rate.
• Consider extending your mortgage term. Spreading your repayments over a longer period could reduce your monthly costs, although you'll generally pay more interest over the lifetime of your mortgage.
• Explore other repayment options. Depending on your circumstances, switching temporarily to interest-only payments could help manage costs. However, you'll still owe the capital you've borrowed, and eligibility, lender approval and a suitable repayment plan are important considerations.

TOP TIP 💡

Don't wait until your current deal expires to explore your options. Many lenders allow you to secure a new mortgage several months in advance, potentially protecting you against further rate rises. And if rates fall before completion, Tembo's free RateCheck service can help eligible customers check whether a better deal is available.

Are tracker mortgages making a comeback?

One of the more interesting developments in the current market is the growing interest in tracker mortgages. A tracker mortgage has a variable interest rate that moves in line with the Bank of England Base Rate, usually with a fixed percentage added on top.

Unlike a fixed-rate mortgage, your monthly repayments can rise or fall when the Base Rate changes. So why are more borrowers considering them?

Right now, some trackers are noticeably cheaper than fixed-rate alternatives. By the end of September, the average two-year fixed rate stood at 5.94%, whilst the average two-year tracker was at 4.45%.

Some tracker mortgages also offer additional flexibility, with certain lenders (such as Barclays) allowing borrowers to switch from a tracker onto a fixed-rate deal without paying an early repayment charge. That could give borrowers the opportunity to benefit from a lower rate now while keeping their options open.

Are trackers worth the risk?

There's an important catch. Financial markets are currently anticipating that the Bank of England could raise its Base Rate in November, with further increases potentially following. If that happens, tracker mortgage repayments could rise too.

And while some products allow borrowers to switch to a fixed rate without an early repayment charge, there's no guarantee that the fixed rates available at that point will be more competitive. Other fees may also apply.

TOP TIP 💡

Considering a tracker mortgage? Ask your broker to show you what your monthly repayments would look like if the Base Rate increased by 0.25%, 0.5% or even 1%. That way, you can decide whether the potential savings are worth the risk.

The bottom line

Mortgage rates have risen quickly, and uncertainty remains about what happens next. But whether you're buying, moving or remortgaging, the important thing is not to make a decision based on headlines alone.

Understanding your options and how different mortgage deals could affect your monthly repayments can help you make a more informed decision.

Not sure what rising rates mean for you? Tembo's mortgage experts can compare deals from across the market and help you find an option that suits your circumstances.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Full terms and conditions of our rate checking service can be found here.

Mortgage and savings products are subject to eligibility and terms and conditions. The value and availability of mortgage deals and savings rates can change.