Mortgage charges go above 5% on Iran battle: Costs to rise for million Britons who have to remortgage this 12 months
The typical two-year fixed rate mortgage has gone above 5 per cent for the first time since last summer, as lenders re-price higher in the wake of the Iran conflict.
The average two-year fixed rate mortgage is now 5.01 per cent, having risen sharply from 4.93 per cent yesterday.
According to rates scrutineer Moneyfacts, it is the highest average rates have been since 6 August last year.
Banks are responding to expectations of fewer interest rates cuts by the Bank of England, or perhaps even rates rises, due to the increased risk of inflation.
Inflation could rise in part due to energy bills, which might go because of disruption in oil and gas supplies.
On a £200,000 mortgage being repaid over 25 years, it means the average two-year fix will now cost someone £1,171 a month.
Before the conflict started, on 27 February, the average two-year fix was 4.83 per cent. This includes rates across all deposit sizes.
On five-year fixes, the average is now 5.09 per cent, up from 5.03 per cent yesterday and 4.95 per cent on 27 February.
On the rise: Home loan interest rates have topped 5% on the back of the conflict in Iran
Adam French, head of consumer finance 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.
‘How far [rate rises] could go is now heavily dependent on how global markets and inflation expectations evolve as conflict in the Middle East unfolds.’
He added that almost 500 residential mortgages had been pulled from the market in the past 48 hours, with many likely to return at higher prices.
The cheapest mortgages on the market are around 3.75 per cent.
The sharp rise in mortgage rates will be of particular concern to the one million households due to come to the end of their cheap fixed-rate deals this year.
Back in 2021, a total of 971,105 five-year fixed-rate mortgage products were taken out, which could have been on interest rates as low as just 0.91 per cent.
Now, with their favourable rates coming to an end, brokers are advising they lock in a deal as soon as possible to swerve further hikes.
Today TSB and Santander hiked rates, following on from Halifax and Barclays yesterday and HSBC, Natwest and Nationwide Building Society on Monday.
HSBC has said it plans to increase its rates again tomorrow, Thursday 12 March.
Prior to the start of the conflict in the Middle East, the lowest two-year fixed rates were hovering just above 3.5 per cent.
Now, the best deals are around 3.75 per cent and some brokers are warning that sub 4 per cent deals could all but disappear by the end of next week.
