Mortgage Warning as Banks Pull Almost 700 Deals Amid Escalating Iran War
Mortgage rates are climbing once again, driven by the intensifying conflict in Iran and concerns that it could fuel inflation in the UK, potentially impacting interest rates. According to data from Moneyfacts, banks and lenders have withdrawn nearly 700 mortgage deals as the Middle East crisis worsens, with sub-4% rates becoming increasingly scarce.
Sharp Decline in Affordable Mortgage Options
The latest figures from Moneyfacts reveal a dramatic reduction in affordable fixed-rate mortgages. On Tuesday morning, only nine deals with rates below 4% were available, a stark drop from 490 offers on March 9. Overall, the mortgage market has seen 689 fewer products since that date, representing almost a tenth of the total market.
Banks and building societies have been raising mortgage rates and pulling products in response to rising swap rates, which lenders use to price mortgages. The Bank of England is set to announce its next base rate decision on Thursday, but expectations for a potential cut have diminished.
Expert Insights on Rising Costs and Market Volatility
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, commented: "Borrowers seeking the lowest fixed rates will be disappointed by the disappearance of sub-4% mortgages, but these are unsustainable with increasing swap rates. Lenders carefully monitor margins, so pricing deals too low would be unwise if interest rates are expected to rise, even in the short term."
Adam French, head of consumer finance at Moneyfacts, highlighted the financial impact on borrowers. He noted that the average two-year fixed rate has jumped from 4.83% at the start of March to 5.28% today—its highest level since April 2025. Similarly, the average five-year fix has risen from 4.95% to 5.32%, reaching its peak since February 2025.
French explained: "For a borrower with a £250,000 mortgage over 25 years, this means paying £788 more per year on a two-year fix or £651 more on a five-year deal compared to just a fortnight ago. Choice continues to dwindle as lenders withdraw deals and reprice in response to rapidly rising funding costs."
He added: "Borrowers may need to brace for further volatility in the weeks ahead as the global economy prepares for a 'Trumpflation' wave."
How to Find the Cheapest Mortgage Rates
If your current mortgage is nearing expiration, follow these steps to secure the best deal:
- Gather Information: Collect details about your existing deal, including your current rate and loan-to-value (LTV) ratio. A lower LTV often results in cheaper rates, as you are borrowing less relative to the property's value.
- Explore Options: Use online comparison tools or consult a mortgage broker to access deals not available on the open market.
- Contact Your Lender: Speak with your current lender about product transfer options, which allow you to secure a new deal from them.
- Decide on Terms: Determine whether to fix your rate—and for how long—or opt for a tracker or variable mortgage.
- Timing and Charges: You can typically lock in a new mortgage deal three to six months before your current one ends. Check for early repayment charges if considering an early exit.
This proactive approach can help mitigate the impact of rising rates and reduced product availability in a volatile market.
