Mortgage Market Sees Rate Surge Amid Lenders' Proactive Customer Outreach
Mortgage products have begun gradually returning to the market, but with substantially higher interest rates attached, according to financial information website Moneyfacts. This development comes as lenders prepare to proactively contact 1.6 million customers whose fixed-rate mortgage deals are set to expire before the end of 2026.
Sharp Increases in Average Mortgage Rates
Moneyfacts reported that the average two-year fixed-rate homeowner mortgage has climbed from 4.83% at the beginning of March to 5.75% by Friday morning, marking the highest average rate observed since August 2024. Similarly, the average five-year fixed-rate mortgage has risen from 4.95% at the start of March to 5.69% on Friday, reaching its highest point since December 2023.
These rate hikes follow the disappearance of hundreds of mortgage deals from the market, driven by shifting expectations in financial markets. Swap rates, which lenders use to price mortgages, have increased, while the ongoing conflict in the Middle East has contributed to heightened inflation expectations.
Lenders' Commitment to Customer Contact
Following a meeting with Chancellor Rachel Reeves on Thursday, mortgage lenders secured a commitment to proactively reach out to the 1.6 million customers whose fixed-rate deals will conclude between now and the end of 2026. Lenders will outline available options and explain how customers can access bespoke support tailored to their financial situations.
Adam French, head of consumer finance at Moneyfacts, commented: "Mortgage rates have continued to rise sharply, with around three in four active lenders increasing rates, launching or withdrawing products this week." He added: "Products have been slowly trickling back on to the market in recent days, with 160 added since Wednesday, but priced at much higher rates than previously which has been driving up average rates on new mortgages."
Despite this modest return of products, there remains a net reduction of 1,620 mortgage products compared to March 9, 2026, when lenders began withdrawing deals in response to rising funding costs.
Support Measures and Their Limitations
Chancellor Reeves also reaffirmed the Mortgage Charter with lenders during Thursday's meeting, which aims to ensure borrowers experiencing difficulties receive appropriate support. "In uncertain times, people need clear reassurance and practical help," Ms. Reeves stated.
Mr. French welcomed the recommitment to the charter but cautioned: "If these measures are fully back in play, they can offer borrowers some flexibility, but it's important to be clear that they often come with very real trade-offs." He explained that options such as extending mortgage terms or switching to interest-only payments can provide short-term relief from monthly pressures but ultimately increase the total cost of borrowing over time.
"While these measures may provide some breathing space and help households avoid falling into a debt trap, they do not solve the underlying affordability challenge," French emphasized. "Many borrowers coming up for remortgage are now facing the prospect of paying thousands of pounds more per year than they would have expected just a few weeks ago, at a time when inflationary pressures are once again building."
Industry Perspectives and Recommendations
A spokesperson for UK Finance assured: "Mortgage lenders provide a wide range of support to their customers. Help will always be available and anyone worried about their mortgage should get in touch with their lender as early as possible." Contact methods will vary by lender and customer, potentially including phone calls, letters, or emails.
Nicholas Mendes, mortgage technical manager at John Charcol, advised homeowners: "The main message for anyone worried is simple. Do not leave it until the last few weeks. Review your options early, understand what your payments could look like, and if the jump is going to be difficult, speak to your lender or broker before you come under pressure."
Hina Bhudia, a partner at Knight Frank Finance, warned of potential market pressures: "Lenders risk becoming inundated and being forced to reprice even higher than they otherwise might have done, which creates a snowball effect – a more intense clamour to secure a rate that puts further pressure on lenders."
On Thursday, a spokesperson for Santander UK confirmed the bank is "carefully monitoring customers' financial health" and maintains a range of existing options to support those facing financial difficulties, tailored to individual circumstances.
The financial impact for mortgage holders transitioning from fixed-rate deals will largely depend on how long they had fixed their rates and the interest rate environment prevailing at the time of their original agreement.
