Nearly 700 mortgage deals have been pulled in the past two weeks as the economic fallout from the Iran war pushes up UK mortgage rates, according to Moneyfacts. The average two-year fixed rate has risen from 4.83% at the start of March to 5.28%, while the average five-year fix has increased from 4.95% to 5.32%. This marks the biggest upheaval since the aftermath of Liz Truss's mini-budget in 2022.
For a borrower with a £250,000 mortgage over 25 years, the rise equates to paying £788 more annually on a two-year fix, or £651 more on a five-year deal compared with two weeks ago. Adam French, head of consumer finance at Moneyfacts, said: 'War in the Middle East has added almost £800 to a typical annual mortgage bill in just two weeks.'
The upward trend is a blow to buyers and those remortgaging, with around 1.8 million fixed-rate deals due to end in 2026. Before the conflict, economists had anticipated two rate cuts in 2026 after four cuts last year. However, higher oil and gas prices stoking inflation have pushed up swap rates used by lenders to price mortgages.
Financial experts now expect the Bank of England to hold rates at 3.75% at its Thursday meeting, with cuts off the table. Some commentators warn that rates could rise before year-end if inflation increases. Only nine fixed-rate deals below 4% remain on the market, down from 490 at the start of last week.
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.'
