UK average mortgage rates have risen back to their highest level in a month, as renewed tensions in the Middle East feed through to homeowners. The average rate on a new two-year fixed deal now stands at 5.59%, according to financial information service Moneyfacts – the highest since 19 June. The average rate on a five-year fixed deal is 5.61%, a level last seen on 7 June.
The increase follows a period of falling rates after a ceasefire between the US and Iran initially appeared to hold. But fresh strikes and Houthi militia attacks on oil tankers in the Red Sea have reignited fears over global energy supplies. Oil prices hit $100 a barrel for the first time since May on Thursday after several days of increases, stoking fears of higher inflation and a lower likelihood of interest rate cuts.
“Average UK mortgage rates have risen back to level of a month ago as Middle East tensions feed through to lenders.”
Lenders' funding costs have increased as markets judge that a prolonged conflict reduces the possibility of interest rate cuts by central banks. The five biggest High Street banks are among a host of lenders which have increased their interest rates on new fixed deals in recent days. HSBC has also announced it will raise its mortgage rates on Monday.
"It will be incredibly frustrating for borrowers to see rates rise back up to where they were a month ago. The positive progress over recent weeks now feels all but lost, but what the market needs is a period of stability," said Rachel Springall, finance expert at Moneyfacts. She said 100 deals had been pulled temporarily as lenders reconsider their pricing plans. She suggested that anyone who needed to remortgage this year could lock in a new deal now with their existing lender ahead of time.
Recent projections by the Bank of England suggest just over five million homeowners should expect their monthly mortgage repayments to increase by the end of 2028. More than eight in 10 mortgage customers have fixed-rate deals, meaning their interest rate does not change until the deal expires. While the current rates remain below the Iran war peak in April of 5.9%, the upward trend has left borrowers questioning how long the instability will last.