Barclays hikes mortgage rates twice in a week as more than 1,000 sub-5% deals are pulled in a month

More than 1,000 sub-5 per cent mortgage deals have been taken off the market in the last month as lenders rush to reprice in the face of a bond market sell-off. 

Barclays raised some of its mortgage rates for the second time this week, the latest in a raft of lenders to push up costs for homeowners as higher inflation related to the Middle East conflict stokes fears the Bank of England will increase the base rate. 

The number of two-year fixed mortgages with rates below 5 per cent was 630 at the beginning of September, but by yesterday it had plummeted to just five, according to figures from rate scrutineer Moneyfacts.

Five-year fixes had fallen from 638 to only seven in the same period.

The cheapest rate is 4.91 per cent on a five-year fix with Skipton Building Society, a deal that comes with a £1,995 completion fee.

The cheapest five-year deal is a 4.93 per cent rate with Yorkshire Building Society which comes with a £1,495 fee. Both are reserved for those buying a home with at least a 40 per cent deposit. 

On average, a two-year fixed mortgage is now at 5.93 per cent and a five-year fix is 5.95 per cent according to Moneyfacts. 

At the start of this year, most borrowers were able to get rates below 4 per cent with two-year fixes going as low as 3.5 per cent.

A raft of lenders have upped their mortgage rates in recent weeks due to the escalation of the war in Iran and fresh increases in energy prices.

Barclays increased its fixed mortgage rates for the second time in a week today.

On Monday it withdrew its 4.75 per cent two-year fixed mortgage and 4.93 per cent five-year fix.

These were replaced with deals at 5.05 per cent and 5.03 per cent. 

Today, it has said it will increase rates again but the level of hikes has not been disclosed.  

Other lenders including Nationwide, Virgin Money and TSB also increased rates this week.

It is anticipated that the Bank of England will raise interest rates in order to stem inflation, by making it more expensive to borrow and encouraging people to spend less. 

While the Bank of England held base rate at 3.75 per cent in September, the sixth consecutive hold since December 2025, most economists are in agreement that it will hike the rate later this year. 

Mortgage rates usually increase when the base rate is increasing and fall when it is falling, with savings rates moving in the opposite direction. 

Rising bond yields affect mortgage rates

Gilt yields, in other words the returns on Government borrowing, have been rising sharply due to inflation concerns, rising public sector debt and concerns about Chancellor John Healey’s upcoming Budget. 

This matters for mortgage holders because bond yields heavily influence mortgage rates. 

Dan Coatsworth, head of markets at AJ Bell, says: ‘When gilt yields rise, lenders’ funding costs tend to increase, which often feeds through into higher mortgage rates. 

‘That can mean higher repayments for homeowners and a cooler housing market as some people find they fail mortgage affordability tests which removes would-be buyers from the equation.’

Yields on 30-year gilts, which determine the interest the Treasury has to pay to borrow over that period, climbed to 6.029 per cent, its highest level since January 1998. 

The sell-off is not confined to long-term government borrowing, however. 

Five-year gilt yields are at their highest since 2008, and it is these shorter-dated rates that feed most directly into mortgage pricing according to Nicholas Mendes, mortgage technical manager at broker John Charcol. 

He said: ‘For borrowers, today’s moves add to pressure that has been building for weeks, and they come just over a month before the Bank of England’s next interest rate decision on 5 November. 

‘Lenders have already been pushing up fixed rates, and when funding costs move this quickly, changes can come within days and deals can be pulled with very little notice. 

‘Uncertainty makes it worse, because lenders add an extra margin to their rates when they are unsure where their costs will be next week. 

‘Further increases are likely while markets stay this unsettled, and borrowers should not assume today’s rates will still be available at the end of the week.’

What should borrowers do?  

Experts predict that mortgage lenders will continue to hike in the coming weeks. 

Borrowers who need to remortgage in the next few months are therefore being urged to fix now and lock in a lower rate. 

David Hollingworth, associate director at broker L&C Mortgages said: ‘Barclays’ latest move highlights just how quickly the mortgage market can change. 

‘Rising funding costs are putting pressure on lenders which may lead to further repricing in the weeks ahead. Borrowers who are considering fixing would be wise to act sooner rather than later.

‘Rates can be pulled from the market with little or no notice, so securing an option now offers protection against further upward pricing movements, while retaining the flexibility to switch if conditions become more favourable before completion.’

Fixed mortgage rates can usually be secured between three and six months in advance of an existing deal ending. 

If rates fall in the meantime, borrowers can usually switch to a different deal without penalty.