Mortgage lender rate hikes have driven average two- and five-year fixed rates above 5%, but borrowing costs remain lower than a year ago.
Analysis by Moneyfacts shows that since the beginning of March, the average two-year fixed rate has risen from 4.84% to 5.28%, while five-year fixed rates have increased from 4.96% to 5.32%.
Prolonged market uncertainty caused by the war in the Middle East could lead to further rate rises and, warns Moneyfacts, an increase in the Bank of England base rate if there is a spike in inflation. The base rate currently rests at 3.75%, with the next Monetary Policy Committee meeting scheduled for 19 March.
Despite the swathe of rate increases to hit the market this week, average borrowing costs remain lower than they have been in recent years.
The average mortgage rate across product types and loan-to-value (LTV) tiers was 5.62% in March 2024. In March 2025, this was 5.33%, and as of March 17, the average cost of a mortgage deal was 5.27%, up from 4.9% at the start of the month.
Barclays, HSBC, Lloyds Bank, NatWest and Santander have increased rates since the start of March, with more rates of between 0.3% and 0.35% announced yesterday from lenders including Nationwide and Co-op Bank.
The decision to increase rates has been caused by rising swap rates triggered by the unrest in the Middle East, leading to the disappearance of deals priced below 4%.
Fears of base rate rise
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “In an unprecedented turn of events, the unrest in the Middle East has led to rising swap rates, which has inflated mortgage rates and caused deals to be pulled from sale, some temporarily.
“These developments have scuppered expectations for the Monetary Policy Committee to vote for a cut to the Bank of England base rate, now much more likely to vote for a hold this week. If such uncertainty is prolonged, and indeed if inflation spikes, we could even see an increase to BBR before the year is over. It really is too early to tell what might happen, but borrowers searching for a new deal should seek advice if they are concerned about rising costs.”
