The average UK mortgage rate has risen above 5% for the first time in months, as lenders scramble to reprice loans in response to financial market turmoil sparked by the Middle East conflict. Nearly 500 mortgage products have been withdrawn in the past 48 hours, marking the biggest upheaval since the aftermath of the 2022 mini-budget.
Major high street lenders including HSBC, Nationwide, Halifax, and Barclays have pushed through rate increases. HSBC announced a second round of price rises effective from Thursday across a wide range of products. The average two-year fixed-rate mortgage reached 5.01% on Wednesday, up from 4.84% before the US-Israeli conflict with Iran, while the typical five-year deal now stands at 5.09%.
Adam French, head of consumer finance at data firm Moneyfacts, described recent days as “some of the most turbulent in the UK mortgage market since the aftermath of the September 2022 mini-budget.” However, he noted that the scale of product withdrawals is “nowhere near the shock seen in late September 2022 when 935 products disappeared in a single day.”
The rising costs are a blow to buyers and those with fixed-rate deals ending soon. Approximately 1.8 million fixed-rate mortgages are due to expire in 2026, requiring borrowers to secure new loans at higher rates. Before the conflict, economists had anticipated two interest rate cuts in 2026 following four reductions last year, but higher oil and gas prices have stoked inflation fears, pushing up swap rates used by lenders to price mortgages.
Financial experts now expect the Bank of England to hold the base rate at 3.75% at its March meeting. The probability of a rate cut this year has fallen to 20%, down from 50% on Tuesday. French warned that the direction of mortgage rates is “heavily dependent on how global markets and inflation expectations evolve as conflict in the Middle East unfolds.”
