Credit Score Basics > What is the average mortgage interest rate in the UK?

What is the average mortgage interest rate in the UK?

Wollit Team2 minute read · Updated 2nd July 2024

The average mortgage interest rate in the UK can vary quite a bit depending on what kind of mortgage you look at, for how long you’re taking it, and even when you take it.

What is the average mortgage rate in the UK right now?

As of writing this article, the average rates for different types of mortgages across all lenders in the UK are:

The average cost of a two-year fixed-rate mortgage is 5.89%.
The average cost of a five-year fixed-rate mortgage is 5.39%.
The average standard variable rate (SVR) is 8.65%.

All of these presume a loan-to-value ratio of 75%, which means a deposit of 25%. Also, the big six lenders tend to charge lower interest rates – their average SVR is right now only 7.5%.

However, this might be down to the fact that their lending standards are higher, which means their mortgages are available only to people with good or excellent credit scores.

Once the fixed rate period is over, your mortgage will move to a variable rate. This rate moves up and down based on what the Bank of England base rate does (hence the name).

For example, the average variable rate is 8.65% as of May 2024, compared to just 4.75% in July 2022. This doesn’t mean that the variable rate goes up only – we’ve also seen variable rates of close to 1% a few years back.

Where can I check the average mortgage rate right now?

To check the average interest rate for a mortgage at the time when you’re reading this article, you should check out Uswitch’s Mortgage Rates Today page.

It uses data from a company called Mojo Mortgages, and it updates daily.

How have mortgage rates changed over time?

According to Statista, mortgage rates in the UK have fluctuated quite a bit in recent years:

In December 2021, the average two-year fixed mortgage rate was 1.57%, with some deals even lower for those with a large deposit and excellent credit history.
By December 2023, the average two-year fixed rate jumped to 5.43% as inflation took hold.
Rates have since started to come down as inflation eased.

It’s true that over the long term, rates have tended to decline. But as you can see, sometimes rates can spike quite dramatically. If you’re concerned about affording a spike in the mortgage rate, maybe consider getting one with a longer fixed-rate window.

What factors influence mortgage rates?

Mortgage rates are influenced by several factors, including:

The Bank of England’s Bank Rate: This affects not only variable rates but also fixed rates. A fixed-rate simply “locks in” a certain rate level for a period of time to make your payments a bit more predictable.
Inflation: When inflation goes up, the Bank of England raises interest rates to cool things down. This is also true in reverse: when inflation goes down, the Bank of England will also lower rates to encourage economic activity, lending, and spending.
Your credit score: Having an excellent credit score means you will usually be offered a lower interest rate. However, if you have a bad credit history you will usually be offered a higher interest rate since the lender will think that you have a higher risk of defaulting and they want to be compensated for that risk.

This is why it’s so important to always keep working on a credit score, especially if you’re planning to get a mortgage in the near future.

The good news is that now there are many apps that can help you build and improve credit.

One such app is Wollit. Wollit works by reporting a fixed-fee monthly subscription as a loan repayment to all credit reference agencies. This helps you build a history of timely debt repayments, which is the main factor that matters for your credit score.

On top of this, Wollit can also report your monthly rent payment to Experian. This can add another line in your credit report that shows lenders you pay your bills on time, helping you make the most of your rent while you prepare to become a homeowner.