This is according to the latest data from Moneyfactscompare.co.uk, which comes as lenders are re-pricing their mortgage deals again.
Tomorrow, the Bank of England is expected to raise its benchmark interest rate, which sets the cost of borrowing, from 3.75% – where it was almost a year ago – to 4% in response to rising inflation.
Today, the average interest rate on a new mortgage reached a three-year high, rising to 5.89%, up from 5.83% at the beginning of October. The last time this number rose was in November 2023, when it reached 6.07%.
This comes despite several lenders, including Barclays, Halifax and Nationwide, having cut some mortgage rates in recent days.
For borrowers exiting fixed-rate deals, especially those locked in five years ago when mortgage rates were low, it means a huge jump in repayments.
In fact, Moneyfactscompare.co.uk data shows that since the war in Iran began in March, more than £2,000 has been added to the typical mortgage repayment annually.
The year began with typical mortgage interest rates of 4.83%. But due to the impact of events in the Middle East, it rose by 1.14% to 5.97%, according to Moneyfactscompare data.
If interest rates rise tomorrow, as expected, Moneyfactscompare said borrowers would face a further rise of around £440 in mortgage repayments over 12 months. A 0.25% increase adds around £37 to your monthly mortgage repayments, or £444 a year. This is based on an interest rate of 5.00%, rising to 5.25% – borrowing £250,000 over 25 years.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Mortgage rates have risen to a three-year high as lenders seek to readjust interest rates amid swap rate volatility.
“Major lenders are anticipating an imminent rise in the Bank of England base rate (BBR), and their lowest interest rates are now priced 0.44% lower than they were at the start of September.”
If policymakers at the Bank of England’s Monetary Policy Committee (MPC) point to a calmer path on future interest rate expectations, fixed mortgage rates could fall slightly before the year is out, Springall explained.
Despite this, the rate hike would be the first in three years, and with conflicts in the Middle East and between Russia and Ukraine remaining on the brink, Springall said, prolonged pressure on global inflation could worsen the outlook for UK interest rates.
How much did mortgage rates rise?
The base rate increase of 0.25% to 4% will impact tracker mortgages, but according to analysis by L&C Mortgages, the “biggest shock” to borrowers has already been caused by higher lender rates occurring throughout 2026.
The mortgage broker’s analysis of average mortgage rates for the top 10 lenders suggests that some borrowers are now paying almost £5,000 more each year compared to those who took out a remortgage deal in 2021.
Five years ago, the average five-year fixed remortgage rate among the top ten lenders was just 1.30%, meaning repaying a £200,000 mortgage over 25 years was around £781 a month.
At an average day rate of 5.16%, these premiums rise to £1,188 per month, an increase of more than £400 per month or nearly £4,900 per year.
David Hollingsworth, associate director at L&C Mortgages, said: “The sheer scale of change in interest rates since late 2021 means that those approaching the end of a five-year fixed interest rate will have to steel themselves for a significant mortgage interest rate rise.
“Preparing in advance will help to understand the potential options. This will not make it easier to deal with, but it can at least ensure some certainty before the current deal expires.”
“Floating rate borrowers will now feel the potential impact of higher inflation on their mortgage repayments, as well as rising other costs of living. Unlike fixed rates, they are reacting to the movement of the policy rate rather than expectations. The question on their lips is whether an increase now could be just the first of a number to come.”
