Mortgage costs have increased sharply in recent weeks, with new data showing that a typical borrower is now paying around £788 more per year compared with before the recent escalation in tensions involving Iran.
The figures, compiled by Moneyfacts, are based on a £250,000 mortgage over 25 years with an average two-year fixed rate, which has risen to 5.28%.
This increase reflects a rapid shift in the mortgage market since late February. Lenders have responded to heightened economic uncertainty by raising rates and withdrawing some of their most competitive products. In particular, sub-4% fixed-rate deals, which were widely available only weeks ago, have largely disappeared.
Major lenders, including Barclays, HSBC, NatWest, Nationwide and Santander, have all withdrawn these lower-rate options.
Average rates have climbed quickly. Two-year fixed deals have risen from 4.83% at the start of March to 5.28%, while five-year fixes have increased from 4.95% to 5.32%. For borrowers considering a five-year deal, this equates to an additional £651 per year compared with just a fortnight ago.
At the same time, the choices have narrowed. There are now 689 fewer mortgage products available than earlier in the month, reducing options for buyers and those remortgaging.
Despite this, the situation remains less severe than the market disruption following the September 2022 UK mini-budget, when around a quarter of mortgage deals were withdrawn.
Borrowers on fixed rates are protected until their current deal ends. However, those approaching renewal should plan early, particularly as rates may continue to fluctuate in line with the Bank of England’s decisions.
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