Mortgage rates have been slowly rising this week, as the Iran war entered its third week.
This week, the Bank of England held the bank rate at 3.75 per cent citing global volatility, a decision which was expected.
Since the start of March up until today, Moneyfacts’ average two-year fix residential mortgage rate has risen from 4.83 per cent to 5.35 per cent.
The average rate across mortgage rates ended the week at 5.32 per cent, up from 5.07 per cent at the end of last week (March 12), showed Moneyfacts data.
Adam French, head of consumer finance at Moneyfacts, said since the Bank of England decided to hold the base rate, swap rates, which underpin mortgage pricing, have “risen sharply”.
Two and five-year swaps are now around one percentage point higher than at the start of the conflict and at their highest level since January 2025.
They are now sitting around 4-4.25 per cent.
French said: “With two and five-year swaps now sitting at their highest level in more than a year, lenders are once again facing higher funding costs, and this will feed through into mortgage pricing.”
On Thursday (March 20), the Bank of England’s Monetary Policy Committee voted unanimously in favour of holding the bank rate.
Danni Hewson, head of financial analysis at AJ Bell, said: “The last time the Bank of England’s MPC members voted unanimously was during the Covid pandemic, and the decision once again illustrates the impact global instability can have on the UK economy.
“A few weeks ago, inflation had been expected to fall back to the Bank’s 2 per cent target this spring.
“Lenders have already started to make moves and mortgage rates have been ticking up. Markets are now pricing in an almost 50 per cent chance that April’s meeting will see rates rise to 4 per cent with the potential for two additional rate hikes by the end of the year.”
Ed Monk, pensions and investment specialist at Fidelity International, said it is now more likely the bank rate could be increased this year.
He added: “That’s a jarring reversal of expectations from where we were just a few weeks ago.
“This will be troubling for households, 1.8mn of whom are due to reach the end of fixed-rate mortgage deals in 2026 and will be looking for a new home-loans.
“New mortgage rates were already likely to be higher than their previous deals and now rates in the mortgage market look to be on the rise.”
tara.o’connor@ft.com
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