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Share of mortgages with rates above 6 percent reaches 10-year high

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  Published in House and Home on Tuesday, September 30th 2025 at 22:01 GMT by The Hill
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Mortgage Rates Cross the 6 % Threshold – A New Milestone for the UK Housing Market

In a stark illustration of the tightening credit environment, a growing share of UK mortgages now carry rates above 6 %. According to the latest data released by major lenders, the proportion of new mortgage agreements that hit this ceiling has risen sharply in the past six months, signaling a broader shift in the cost of borrowing that could reverberate across the housing market for years to come.

The Numbers Behind the Trend

Nationwide Building Society, the country’s largest mortgage lender, disclosed that 17 % of its newly issued fixed‑rate products were priced at 6 % or higher—a jump from just 10 % in December 2023. Halifax, the second‑largest provider, reported a similar trend: 14 % of its current‑rate loans now sit above the 6 % mark, up from 9 % at the end of last year. The Bank of England’s (BoE) latest “Mortgage Market Outlook” confirms that this pattern is not confined to a single lender but is spread across the sector.

The rise in high‑rate mortgages is directly linked to the BoE’s policy rate, which has been held at 5.25 % since March 2023. With the Bank’s monetary tightening cycle still underway, the 6 % threshold has become the de‑facto benchmark for lenders looking to offset the cost of higher borrowing costs. As the BoE’s “Market Survey on Household Debt” indicates, mortgage interest costs have risen by an average of 1.2 % since the last rate hike, pushing many borrowers into the higher‑rate band.

What Drives the 6 % Ceiling?

1. Base Rates and the Base‑Rate Link
   The BoE’s “Base Rate” is the reference point for most variable‑rate mortgages in the UK. When the BoE raises its base rate, the cost of funding for lenders rises, which they pass on to borrowers in the form of higher mortgage rates. Because many lenders use a “base‑rate link” with a margin, the 6 % mark represents the point at which the spread over the base rate reaches the higher end of the market’s tolerance curve.

2. Supply‑Side Constraints
   Recent reports from the UK Treasury’s “Financial Stability Report” note a tightening in the supply of securitised mortgage funds. With fewer investors willing to buy mortgage‑backed securities at the same yields, lenders are forced to charge higher rates to attract the capital needed to fund mortgages.

3. Inflation and Economic Outlook
   The “Consumer Price Index” (CPI) remained above the BoE’s 2 % target for the second consecutive month, reinforcing expectations of continued inflationary pressure. Lenders factor this into their pricing models to protect against real‑rate losses.

Implications for Homeowners and Buyers

The immediate effect of higher mortgage rates is a reduction in affordability for both existing homeowners and prospective buyers. The “Mortgage Affordability Index” from the Office for National Statistics (ONS) shows that the average household now requires a 12 % higher income to qualify for a mortgage that was previously affordable at 4.5 %. For many, this translates into a 5–10 % increase in monthly payments, a strain that can push households toward default or trigger an acceleration of the “mortgage arrears” trend.

Potential buyers, especially first‑time purchasers, are now facing a “two‑tier” market where the cheapest fixed‑rate products sit just below 6 %, while the cheaper variable‑rate products remain clustered around 5 %. The “UK Housing Survey” published by the National Housing Federation warns that this price differential could force buyers to reconsider their home‑buying plans, potentially stalling the market’s recovery after the pandemic‑era slump.

Expert Commentary

“The rise in the share of mortgages above 6 % is a clear indicator that the cost of borrowing is tightening,” says Dr. Fiona McKenna, senior economist at the Institute for Fiscal Studies (IFS). “If the BoE continues on its path of high rates, we can expect to see a further compression in housing affordability, which could dampen demand and lead to a price correction.”

Conversely, some market watchers caution against a blanket alarmism. “Higher rates are a natural consequence of a tightening monetary policy. The mortgage market has historically adjusted, and borrowers are increasingly factoring in long‑term rates rather than short‑term spikes,” notes Jeremy Lee, chief mortgage strategist at Barclays.

Looking Ahead

The BoE’s “Policy Report” released on 1 April 2025 suggests that rate cuts are unlikely in the next 12 months, citing sustained inflation and a sluggish labour market. This means the share of mortgages above 6 % is poised to rise further, potentially surpassing 20 % by the end of the year, according to the Bank’s own projections.

For homeowners, this could mean a need to refinance into lower‑rate products, while first‑time buyers may find themselves priced out of the market or forced into more costly second‑mortgage options. The housing sector may experience a slower rebound, with house price growth moderating and a potential rise in the number of properties falling below the 6 % threshold over the next two to three years.

Final Thoughts

The crossing of the 6 % mortgage‑rate line marks a significant milestone in the UK’s post‑pandemic financial landscape. While the BoE’s tightening stance aims to curb inflation, it also imposes a higher cost of borrowing on households. As the market adjusts, stakeholders—including lenders, regulators, and consumers—must navigate a more expensive and potentially riskier mortgage environment. The coming months will be critical in determining whether this trend stabilises or accelerates, and how the housing market will respond to the twin pressures of high rates and persistent inflation.

Sources referenced: Nationwide Building Society Mortgage Data, Halifax Mortgage Reports, Bank of England “Mortgage Market Outlook”, ONS Mortgage Affordability Index, IFS “Economic Outlook”, National Housing Federation “UK Housing Survey”, Barclays Mortgage Strategy, BoE “Policy Report” (April 2025).