LENDERS have pulled their entire mortgage ranges and first-time buyers are struggling to find cheap deals amid housing market chaos.
Mortgage rates have been climbing for weeks as the war in the Middle East has caused economic instability and raised fears of interest rate hikes.
It had been predicted the Bank of England could cut its base rate to the lowest level in three years by the end of the summer.
The base rate, which affects the interest rates offered to consumers on mortgages and savings, is currently 3.75%.
But the conflict – which could see inflation levels rise once again – means markets are now expecting as many as four interest rate hikes this year.
This could see the base rate rocket up to 4.75%, the highest it’s been since February last year.
As a result, many banks have already started removing their cheapest mortgage deals and increasing prices.
Some have even begun pulling deals, which brokers say is because the markets are moving so fast that they’re unable to price quickly enough.
Fleet Mortgages, which is owned by Staling Bank, pulled all of its fixed deals yesterday afternoon.
It told brokers in an email this was due to “extreme market volatility”.
Clydesdale Bank withdrew its fixed-rate mortgages for new customers yesterday evening, saying it was “in light of current market conditions”.
Coventry for Intermediaries, which is part of Coventry Building Society, pulled all its new customer deals over the weekend.
Meanwhile Family Building Society also withdrew its range of fixed mortgages, including for existing customers, on Monday.
It told brokers: “Due to significant increases in the cost of funding our fixed-rate mortgages, we have temporarily withdrawn all of our fixed rate mortgage products from sale today, 23 March 2026, with immediate effect.
“The product withdrawals apply for both new and existing customers, and are no longer available for purchase, remortgage, further advance or product switch applications.”
More than a fifth of mortgage products have been withdrawn since the Middle East conflict began, according to Moneyfacts.
Nicholas Mendes, mortgage technical adviser at John Charcol, said: “The main issue is that lenders are struggling to keep pace with how quickly funding costs have been moving, which is why we are seeing more mortgage deals being withdrawn at short notice.
“Mortgage rates do not wait for the next Bank of England decision.
“Lenders price fixed deals off future funding costs, and when those costs move sharply, some will reprice, some will withdraw parts of their range, and others may temporarily pull deals altogether while they work out where pricing needs to reset.”
Deals are likely to return to the market in the coming days, but they’ll likely be repriced at higher rates.
The average two-year fixed rate has gone from 4.83% at the start of March to 5.51% today, according to Moneyfacts.
That means a homeowner with a £250,000 mortgage over 25 years would pay an extra £1,199 per year now, compared with before the conflict started.
The average five-year fix has increased from 4.95% to 5.52%, adding an extra £1,008.
The lowest deal available is now 4.21%, up from 3.51%.
First-time buyers facing payment shock
Mr Mendes said the borrowers most likely to be hit hardest are first-time buyers and those who are remortgaging from much cheaper fixed rates.
Some homeowners who took out a five-year deal when rates were at rock-bottom in 2021 will this year face paying much more.
Meanwhile first-time buyers are seeing a decreasing choice of low-deposit deals.
More than 200 deals for borrowers with a 5% deposit have disappeared since March 6, Moneyfacts says.
This is the biggest daily fall in options since the disastrous Liz Truss mini-budget.
For example, the average rate on a two-year deal at 95% loan-to-value has risen to 6.1%.
Someone buying a £250,000 home on a 25-year mortgage at this rate would pay £1,544 a month.
The five-year equivalent is now sitting at 5.93%, the equivalent of £1,519 a month.
“First-time buyers are more exposed because they are often borrowing at higher loan-to-values and stretching affordability more tightly, so even modest rate rises can have a noticeable impact,” Mr Mendes said.
What should you do now if you’re taking out a mortgage?
If you’re a first-time buyer or coming up for a mortgage renewal, it’s important to plan ahead and be aware of your options.
Adam French, head of consumer finance at Moneyfacts, said a swift end to the Middle East conflict could ease the pressure on mortgage rates slightly.
But he said “the reality is that a more volatile world is a more expensive world”.
“Even though the most competitive deals will remain below average, anyone looking to buy or remortgage this year needs to prepare for higher costs than they would have expected just a few weeks ago,” he said.
To secure the best rates, you should start looking for deals three to six months in advance.
If you talk to a broker, they can often help you help the best rates.
Even if you choose a deal months in advance, you can still switch onto a better rate before your mortgage completes.
That means you can still take advantage if rates start dipping lower again, even if you lock into a deal now.
You could consider extending your mortgage term as one option.
This will reduce your monthly payments because you’re spreading out your repayments over a longer period of time.
Just be aware this will land you with a bigger interest bill in the long run.
Another option is to use any savings you have to overpay your mortgage.
If you’ve paid off more of your mortgage, this should reduce your monthly payments and you may even be able to get a better rate when you go to refix.
However, check you are not overpaying more than allowed as lenders can fine you if you pay off too much too quickly.
