New mortgage borrowers face paying nearly £800 more annually than before the Iran conflict, as the economic fallout drives up UK home loan rates, data from Moneyfacts shows. The average two-year fixed rate has jumped from 4.83% at the start of March to 5.28%, its highest since April 2025, while the five-year fix rose from 4.95% to 5.32%, a level not seen since February 2025.
Nearly 700 mortgage deals have been pulled by lenders in the past two weeks, marking the biggest upheaval since the aftermath of Liz Truss’s mini-budget in 2022. Only nine fixed-rate products below 4% remain on the market, sharply down from 490 at the start of last week, according to Moneyfacts.
“War in the Middle East has added almost £800 to a typical annual mortgage bill in just two weeks, which will be unwelcome news for anyone currently seeking a fixed-rate deal,” said Adam French, head of consumer finance at Moneyfacts. For a £250,000 mortgage over 25 years, that equates to £788 more a year on a two-year fix, or £651 more on a five-year deal compared with a fortnight ago.
The shock waves from the conflict have upended expectations of interest rate cuts. Before the war, economists anticipated two rate cuts in 2026 after the four announced last year by the Bank of England. Now, concerns that higher oil and gas prices will stoke inflation have pushed up swap rates used by lenders. Financial experts expect the Bank to hold rates at 3.75% at its Thursday meeting, with some commentators suggesting rates could rise before year-end if inflation increases.
About 1.8 million fixed-rate deals are due to end in 2026, meaning many borrowers will need to remortgage into a higher-rate environment. “Choice continues to fall as lenders pull deals and reprice in response to rapidly rising funding costs,” French added. “Borrowers may need to brace for further volatility in the weeks ahead as the global economy braces for a ‘Trumpflation’ wave flowing from the US- and Israel-led action in Iran.”
