The UK mortgage market has suffered its sharpest blow since the 2022 mini-budget, with borrowing costs rising sharply in the past month due to the Iran conflict.
Product availability has fallen sharply, with more than 1,200 mortgage deals withdrawn in a single month, according to the latest MoneyFact data and analysis on how the UK mortgage market has changed in the last month in response to the war in Iran.
At the same time, mortgage rates have been sharply revalued, with the average two-year fixed deal rising from 4.84% to 5.84% and the five-year fix rising from 4.96% to 5.75% – the sharpest jump since autumn 2022.
The impact is being felt most by borrowers coming out of old fixed-rate deals, who are facing increases of more than 300 basis points and significantly higher monthly payments. Affordability has also worsened, with typical borrowers paying around £150 more per month on a £250,000 loan, and even more for those with high loan-to-value ratios.
Even the most competitive rates have risen sharply, with the lowest two-year fixed deals at 60% LTV rising by more than a percentage point as lenders respond to higher funding costs.
Adam French, head of consumer finance at MoneyFacts, said: “The conflict in Iran sharply raised rate expectations and borrowing costs skyrocketed in the biggest shock to the UK mortgage market since the 2022 mini-budget.
“Average mortgage rates have risen sharply, with two-year fixed rates rising by 100 basis points from 4.84% to 5.84% in just one month and five-year fixed rates rising by almost 80 basis points from 4.96% to 5.75%. The cheapest deals available to borrowers have also changed dramatically, with the lowest two-year at 60% LTV The fixed rate has increased by more than 100 basis points from 3.51% to 4.60%. Although this is less than the extreme jump seen after the mini-budget, it is still a sharp and sudden change which has worsened the affordability in a very short time.
“For many borrowers, the cost may be significant. If someone takes out a normal two-year fix, it will cost them an average of £150 more per month than a few weeks ago. However, the real payment shock will be felt by those coming out of older five-year deals, where rates have more than doubled, increasing payments by several hundreds of pounds per month.
“The combination of rising rates, reduced choice and increased volatility means borrowers and brokers are operating in a market where timing is of the essence and the window to secure competitive deals may be very short-lived. Unfortunately, anyone looking to buy or take out a mortgage this year will have to be prepared for significantly higher borrowing costs than before this conflict began.”
data tables
Table 1: Average Mortgage Rates
|
|
mini budget 2022 |
iran conflict 2026 |
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|
mortgage term |
23 September-22 |
October 24-22 |
Difference |
March 1-26 |
April 1-26 |
Difference |
|
Average 2 Year Fixed Mortgage |
4.74% |
6.55% |
+181 bps |
4.84% |
5.84% |
+100 bps |
|
Average 5 Year Fixed Mortgage |
4.75% |
6.43% |
+168 bps |
4.96% |
5.75% |
+79 bps |
|
Average mortgage rates compared at the first and end of a 31-day period. Source: Moneyfactscompare.co.uk |
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Table 2: Product Availability
|
|
mini budget 2022 |
iran conflict 2026 |
||||
|
mortgage term |
23 September-22 |
October 24-22 |
Difference |
March 1-26 |
April 1-26 |
Difference |
|
Available Residential Mortgage Products |
3,961 |
3,067 |
-894 (22.6% of market) |
7,484 |
6,201 |
-1,283 (17% of market) |
|
The net change in residential mortgage products available at the first and end of a 31-day period. Source: Moneyfactscompare.co.uk |
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Table 3: Impact on mortgage customers
|
Mortgage Term and LTV |
old rate |
update rate |
Difference |
monthly difference |
annual difference |
|
Repayment from 2-Year Fix – Average Rate |
5.80% |
5.84% |
+4 bps |
+£6 |
+£72 |
|
2-Year Fix to Re-Mortgage – Lowest Rate (60% LTV) |
4.46% |
4.66% |
+20 bps |
£28 |
+£336 |
|
Repayment from 5-Year Fix – Average Rate |
2.77% |
5.84% |
+307 bps |
+£430 |
+£5,160 |
|
Remortgage with a 5-year fix – lowest rate |
1.23% |
4.66% |
+343 bps |
+£444 |
+£5,328 |
|
The 2-year average mortgage rate and the lowest rate as of April 1, 2024. Average 5 year mortgage rates and lowest rates as of 1 April 2021, average compared to the cost of borrowing £250,000 over 25 years and lowest 2 year fixed rates available to resale customers as of 1 April 2026). Source: Moneyfactscompare.co.uk |
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Table 4: Changes in average mortgage cost at different LTVs
|
Mortgage Term and LTV |
March 1-26 |
April 1-26 |
mother difference |
Additional Cost (Monthly) |
Additional Cost (Annual) |
|
Average 2 Year Fixed Mortgage |
4.84% |
5.84% |
+100bps |
+£148 |
+£1,777 |
|
Average 2 year certainty (95%) |
5.45% |
6.40% |
+95 bps |
+£145 |
+£1,736 |
|
Average 2 years fixed (90%) |
5.08% |
6.12% |
+104 bps |
+£156 |
+£1,872 |
|
Average 2 years fixed (75%) |
4.72% |
5.70% |
+98 bps |
+£144 |
+£1,731 |
|
Average 2 years fixed (60%) |
4.23% |
5.39% |
+116 bps |
+£167 |
+£2,007 |
|
Average 5 Year Fixed Mortgage |
4.96% |
5.75% |
+79 bps |
+£117 |
+£1,405 |
|
Average 5 year certainty (95%) |
5.47% |
6.18% |
+71 bps |
+£108 |
+£1,292 |
|
Average 5 years fixed (90%) |
5.12% |
5.98% |
+86 bps |
+£129 |
+£1,544 |
|
Average 5 years fixed (75%) |
4.90% |
5.66% |
+76 bps |
+£112 |
+£1,347 |
|
Average 5 years fixed (60%) |
4.56% |
5.43% |
+87 bps |
+£127 |
+£1,520 |
|
Cost of borrowing £250,000 over 25 years at rates as of 1 March 2026 vs. 1 April 2026. Rates based on first of the month Source: Moneyfactscompare.co.uk |
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Table 5: Minimum Rates
|
|
mini budget 2022 |
iran conflict 2026 |
||||
|
mortgage term |
1 September-22 |
October 1-22 |
Difference |
March 1-26 |
April 1-26 |
Difference |
|
Minimum two-year fixed rate (60% LTV) |
3.24% |
4.56% |
+132 bps |
3.51% |
4.60% |
+109 bps |
|
Source: Moneyfactscompare.co.uk |
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