UK mortgage market experiencing biggest upheaval since the mini Budget, says Moneyfacts

Adam French, head of consumer finance at Moneyfacts, said: “The conflict in Iran quickly upended rate expectations and sent borrowing costs skyrocketing in the biggest shock to the UK mortgage market since the aftermath of the 2022 mini Budget.” 

French said average mortgage rates had risen at pace, and there had been significant movement across the cheapest deals too. 

Its data showed that the lowest two-year fixed rate at 60% loan to value (LTV) had gone up by more than 100bps to 4.6%. 

“While this falls short of the extreme jumps seen in the aftermath of the mini Budget, it is still a sharp and sudden shift that has materially worsened affordability in a very short space of time,” French added. 

Costs rise for borrowers

Further, borrowers face paying £150 more per month or £1,777 annually on a £250,000 mortgage compared to costs at the start of the conflict. Those on higher LTVs could see rises of up to £167 per month.

French said: “For many borrowers, the cost could be significant. Someone taking out a typical two-year fix will find it costs £150 more per month on average compared to just a few weeks ago.

“However, the real payment shock will be felt by those coming off older five-year deals, where rates have more than doubled, pushing up repayments by many hundreds of pounds per month.” 

The remortgage payment shock

For someone remortgaging from an average two-year fix deal secured in 2024, costs could go up by £6 per month or £72 per year by moving from a 5.8% rate to 5.84%. 

For those at lower LTVs, the difference is more pronounced, as if remortgaging from a two-year deal at 60% LTV priced at 4.46% to one at 4.66%, this could result in an additional £28 on monthly repayments and £336 annually. 

The price jump is bigger for those on five-year fixed rates secured in 2021 when pricing was even lower, as they would be transitioning from an average rate of 2.77% to 5.84%, adding £430 to monthly repayments and £5,160 to yearly costs. 

Coming off the lowest available five-year fixed rate at the time, which was 1.23%, remortgagors would be paying £444 more each month or £5,328 extra per year on a rate of 4.66%. 

Fewer deals available

Moneyfacts showed that the number of mortgages on offer shrank by 17% to 1,283 deals in just a month, the sharpest fall since the mini Budget. 

French said: “The combination of rising rates, reduced choice and heightened volatility means borrowers and brokers are operating in a market where timing is critical and the window to secure competitive deals can be very short-lived.

“Unfortunately, anyone looking to buy or remortgage this year needs to prepare for substantially higher borrowing costs than expected before this conflict began.”