The average rate on a new two-year fixed mortgage has climbed back to 5.59%, the highest since 19 June, as renewed conflict in the Middle East pushes up lenders' funding costs. The five biggest High Street banks are among those that have increased rates on new fixed deals in recent days, while HSBC has announced it will raise its mortgage rates on Monday.
The rise follows weeks 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, stoking inflation fears and reducing the likelihood of interest rate cuts.
“UK mortgage rates hit one-month high at 5.59% as Middle East tensions push up lender costs.”
"It will be incredibly frustrating for borrowers to see rates rise back up to where they were a month ago," said Rachel Springall, finance expert at Moneyfacts. "The positive progress over recent weeks now feels all but lost, but what the market needs is a period of stability." She added that 100 deals had been pulled temporarily as lenders reconsider their pricing plans.
The average rate on a five-year fixed deal now stands at 5.61%, a level last seen on 7 June. Although still below the Iran war peak of 5.9% in April, the upward trend has alarmed homeowners. Recent Bank of England projections suggest just over five million homeowners should expect their monthly repayments to increase by the end of 2028.
More than eight in 10 mortgage customers have fixed-rate deals, meaning their payments remain unchanged until the deal expires. Springall suggested that anyone who needed to remortgage this year could lock in a new deal now with their existing lender.