Mortgage rates rise above 5% amid Middle East conflict

The ongoing uncertainty has also seen hundreds of mortgage deals pulled from the market.

Average UK mortgage rates have soared above 5.00% as conflict in the Middle East continues to impact economic forecasts, latest Moneyfacts data has revealed.

It found the average two-year fixed mortgage rate rose to a seven-month high of 5.01% this morning (up from 4.84% on 6 March). Meanwhile, the typical rate charged by a five-year fixed deal hit 5.09% (up from 4.96% over the same period) – its highest in eight months.

The 11 days since the US and Israel joined forces against Iran have been “some of the most turbulent” for the UK mortgage market since the aftermath of the September 2022 mini-Budget, according to Adam French, Head of Consumer Finance at Moneyfactscompare.co.uk. In the past 48 hours alone, 472 mortgage products have been withdrawn – roughly equivalent to 6.5% of the total residential market.

While French said that “many of these deals are likely to return within the next few days and weeks”, borrowers must brace themselves for the possibility of even higher rates as lenders adjust their pricing according to the latest forecasts.

Will mortgage rates continue to rise?

There are many factors that influence mortgage pricing but the Bank of England base rate and swap market perhaps have the most sway.

Until recently, there were expectations for the Bank of England to lower the base rate when it next meets on 19 March in response to forecasts for weaker economic growth and higher levels of unemployment.

However, these have been dampened by concerns that UK inflation could reaccelerate as the ongoing conflict drives up the cost of oil and gas. As a result, swap rates have been volatile and lenders that pre-emptively priced in a cut may now need to reconsider their strategy.

“It’s unwelcome news for borrowers, as the prospect of falling mortgage rates has quickly given way to rate rises”, said French, adding that how much higher they could go “is heavily dependent on how global markets and inflation expectations evolve as conflict in the Middle East unfolds”.

Given the uncertainty, Oliver Dack, Spokesperson at Mortgage Advice Bureau, urged borrowers “not to hold off booking a deal”.

“It’s well worth getting advice in the current climate and speaking to a broker to make sure a product is right for you,” said Dack. “We monitor products regularly and if the markets were to improve before completion, we can always look to move our clients onto a better deal should one become available,” he explained.

Should I speak to a mortgage broker?

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