The mortgage market is seeing some of the biggest instability since the aftermath of Liz Truss’s mini-Budget as average deals rose above 5 per cent for the first time in months.
Lenders are pulling cheaper fixed-rate deals from the market en masse as a result of the conflict in the Middle East – and experts warn they could keep climbing.
Sir Keir Starmer and Rachel Reeves have said they are ready to step in if energy prices stay high as a result of the Iran war, but have made no such commitment when it comes to mortgages.
The average two-year fixed rate mortgage rose to 5.01 per cent on Wednesday, up from 4.84 per cent on 6 March, marking the highest level it has been since August last year.
Meanwhile, five-year fixed rate mortgages now average 5.09 per cent, up from 4.96 per cent on Friday – the highest rate since June 2025.
Around 472 mortgage products have been withdrawn from the market over the past 48 hours, equating to around 6.5 per cent of the total market – the biggest fall since the fallout of Truss’s mini-Budget, after which rates peaked at nearly 7 per cent.
Adam French, consumer finance expert at Moneyfacts, said: “Recent days have been some of the most turbulent in the UK mortgage market since the aftermath of the September 2022 mini-Budget.”
Experts are expecting rates to increase over the next few days if the US-Israeli war with Iran continues.
Louis Mason, director at Oportfolio Mortgages, said: “Lenders are watching swap rates like hawks. If those stay elevated, we could still see another 0.10 to 0.25 percentage points added by some lenders this week, though it’s more likely to come in small, incremental reprices than a dramatic jump.
“For brokers, the pace of changes recently has felt a little like a mini-version of the volatility we saw after the 2022 mini-Budget. We’re not in that level of chaos, products aren’t vanishing overnight, but the frequency of repricing will feel uncomfortably familiar.”
Swap rates – which have risen sharply in the last few days – follow long-term Bank of England base rate predictions and are used by lenders to set their mortgage deals.
Nouran Moustafa, of financial advice firm Roxton Wealth, added: “If swap rates stay where they are, or push higher again, fixed mortgage rates could rise by roughly another 0.15 to 0.35 percentage points this week, with some lenders moving faster than others depending on funding pressure and appetite.”
HSBC is the latest major lender increasing rates on dozens of residential mortgage products from Thursday.
It comes after TSB increased a range of residential products by 0.5 percentage points and Principality Building Society raised rates on its residential mortgages by 0.3 percentage points earlier this week.
Barclays, Santander and NatWest also announced increases, while Aldermore Bank withdrew all of its five-year fixed rate mortgages earlier this week.
The overall average mortgage rate across all fixed deals now stands at 5.04 per cent, up from 4.91 per cent last Friday.
Which lenders have increased rates this week?
HSBC – by an unspecified amount from Thursday
Barclays – by 0.1 percentage points on Tuesday
NatWest – by 0.16 percentage points from 6 March
Santander – some rates by up to 0.24 percentage points from Wednesday
Nationwide – by up to 0.25 percentage points
Coventry Building Society – some rates on Monday
Principality Building Society – has pulled all five-year fixed rate deals
TSB – raised all fixed rate deals by 0.5 percentage points from Wednesday
Virgin Money – by up to 0.25 percentage points from Friday 6 March
Nick Mendes, mortgage technical manager at broker John Charcol, said: “The move back above 5 per cent in the Moneyfacts averages reflects how sensitive mortgage pricing is to movements in funding markets.
“Lenders tend to react with a slight lag because many hedge funding in advance, so when markets move suddenly it can take a few days for that to be reflected across product ranges.”
He said that swap rates have started to ease slightly today, which suggests “some of the immediate volatility may be settling”, and this could stabilise pricing later this week if it continues – but the situation is still very volatile.
French added that many of the deals that have been pulled this week “are likely to return within the next few days”, but at higher rates.
“It’s unwelcome news for borrowers, as the prospect of falling mortgage rates has quickly given way to rate rises. How far they could go is now heavily dependent on how global markets and inflation expectations evolve as conflict in the Middle East unfolds.”
Why price spike would damage Labour
The spiralling cost of mortgages from 2022 was one of the factors which led to the Conservatives’ heavy defeat at the last general election.
Labour blamed Liz Truss’s short-lived spell in No 10, and the management of the economy under other prime ministers, for driving up the cost of borrowing.
While interest rates and mortgage costs increased across the world amid the global spike in inflation caused by the end of the pandemic and war in Ukraine, the UK suffered particular chaos as a result of Truss’s announcement of unfunded tax cuts.
Sir Keir Starmer and Rachel Reeves have boasted of the fact that interest rates have been cut six times by the Bank of England since they took office.
Any reversal of this trend would come as a blow as it would undermine the claim that Labour’s decision to prioritise economic stability has had a direct, positive effect on the household finances of ordinary Britons.
The Prime Minister and Chancellor are already insistent that any economic disruption caused by the war in the Middle East is not their fault and promised to limit the fallout.
But having taken advantage of the turbulence which happened on the Tories’ watch, it may be difficult for Labour to disclaim responsibility for a cost of living hit this time around.
What should you do if you’re looking to fix a mortgage deal now?
Experts say that while rising mortgage rates may be concerning for homebuyers or those remortgaging, they should remember these figures are averages and there are still competitive deals available – so it could be worth fixing now.
Mendes said: “Borrowers should remember that Moneyfacts figures reflect market averages, while the most competitive deals currently available are often materially lower.
“That’s why it’s important to speak with a mortgage broker who can review the latest best buys and explain the options available based on your circumstances.”
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David Hollingworth, director at L&C Mortgages, added: “With such an unpredictable backdrop, those borrowers that are considering a new fixed rate deal at the moment should be looking to secure the rate sooner rather than later.
“Borrowers will need to act quickly if they are looking at a particular deal as it looks like deals will come and go rapidly until things calm down.”
Most lenders will allow you to lock in a fixed rate up to six months before your mortgage takes effect, and move on to a cheaper deal if rates fall in the interim.
Karen Noye, mortgage expert at Quilter, said: “Borrowers approaching the end of a fixed deal should start conversations early, as having options lined up can reduce the risk of being caught by sudden rate moves.”
She said borrowers should be prepared for pricing may remain uneven for a while, so “stress testing repayments at slightly higher rates is sensible”.
“Much now depends on how quickly rate expectations stabilise. If swap rates calm and lenders regain confidence, competition could return, but the outlook is highly sensitive to global events,” she added.
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