Average UK mortgage rates have moved back above 5% after lenders repriced products as a result of market disruption caused by the conflict in the Middle East, according to comparison site Moneyfacts, although those rises could be quickly reversed if the financial markets stabilise.
The firm’s data shows the overall average mortgage rate rose from 4.97% to 5.04% on 11 March. Average two-year fixed rates have climbed to 5.01%, while five-year deals now average 5.09%.
The change follows several days of volatility in mortgage pricing as lenders reacted to rising swap rates. These have moved higher as financial markets fear that geopolitical tensions in the Gulf could lead to higher energy prices, which will then feed into inflation.
Major lenders, including HSBC, Nationwide, Halifax, and Barclays, have all increased rates for many of their products. HSBC has also confirmed that there will shortly be a second round of price rises for many of its mortgage deals.
According to Adam French, Head of Consumer Finance at Moneyfacts: “Recent days have been some of the most turbulent in the UK mortgage market since the aftermath of the September 2022 mini-budget.
Lenders reacted to rapidly rising swap rates
“In the last 48 hours, almost 500 residential mortgage products have been withdrawn as lenders reacted to rapidly rising swap rates.”
Despite the widespread repricing activity, French said the situation remains less severe than in 2022, when 935 mortgage deals disappeared from the market in a single day.
The shift in outlook has also changed expectations for UK interest rates. Before the conflict began, economists had anticipated further reductions in the Bank of England base rate during the course of 2026 following the four cuts in 2025.
The money markets now expect the Bank of England to hold the base rate at 3.75% when policymakers meet on 19 March, with the likelihood of a further rate cut this year receding.
“It’s unwelcome news for borrowers, as the prospect of falling mortgage rates has quickly given way to rate rises,” French said.
And Hina Bhudia, Partner at Knight Frank Finance, said: “There are still a handful of sub-4% fixed-rate deals available, but they are likely on borrowed time. The larger banks like HSBC tend to set the tone, and other lenders follow.”
Market conditions remain volatile,
She added that if market conditions remain volatile, borrower preferences could begin to shift.
“Should this continue, tracker products may soon be cheaper than two-year fixed products, which will be appealing for some, but each borrower will have to take a view on the risk that interest rates move against them.”
The rise in mortgage costs comes just as a large number of borrowers approach the end of their existing deals. Around 1.8 million fixed-rate mortgages are due to expire during 2026, meaning many households will need to refinance at far higher rates than they have become used to.
Moneyfacts’ Adam French concludes: “How far they (rates) could go is now heavily dependent on how global markets and inflation expectations evolve as conflict in the Middle East unfolds.”
If tensions ease, even slightly, or there is any sign of a resolution, the financial markets could quickly stabilise, which would then push swap rates and mortgages back down again.
