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Lenders are set to push through a new wave of UK mortgage rate rises after markets took fright over the inflationary implications of the war in the Middle East, brokers and finance experts warned.
The last two-year fixed-rate deals priced below 4 per cent disappeared from the market this week, as lenders lifted their mortgage interest rates across the board, with average rates climbing back to their levels of March 2025.
The mortgage rate rises come amid continued disruption to seaborne trade from the Iran war, a surging oil price, warnings over inflation from the Bank of England and rising gilt yields.
David Hollingworth, associate director at broker L&C Mortgages, said: “Increases to fixed rates are very likely to continue for now and borrowers should brace themselves for a bumpy ride.”
HSBC, which has some of the more attractive deals on the market, on Friday announced higher rates would take effect from Monday. Borrowers have until midnight on Sunday to apply via brokers.
Santander on Thursday pushed through rises across its mortgage range of 0.3 percentage points. Together with increases earlier in the week, this means its two-year fixes rose by a de facto 0.65 percentage points in the past few days.
On Friday afternoon, Coventry Building Society said it would withdraw all of its residential and buy-to-let fixed rate mortgages for new borrowers on Sunday evening.
Aaron Strutt, product director at broker Trinity Financial, warned there would be more to come. “It seems likely that we are going to have another round of fixed-rate price hikes especially with future Bank of England base rate cuts looking well and truly off the table.”
Thursday’s unanimous decision by the BoE’s Monetary Policy Committee to hold rates at 3.75 per cent prompted a sell-off in the bond market and a jump in swap rates, which lenders use to price their fixed-rate deals. The two-year Sonia swap rate rose to 4.4 per cent on Friday from 3.9 per cent on Wednesday, while the five-year rate was up to 4.3 per cent from 3.9 per cent.
Adam French, head of consumer finance at finance site Moneyfacts, said markets were “interpreting commentary from the Bank of England as leaving the door open to rate rises amid ‘Trumpflation’ fears”.
Even before the rates decision, other lenders had this week increased their rates, including Nationwide, NatWest and Barclays.
Since the beginning of March, the average two-year fixed rate has risen from 4.83 per cent to 5.35 per cent, its highest level since March 2025, according to Moneyfacts. It calculated this would add an extra £900 to the annual cost of borrowing £250,000 over 25 years.
Brokers suggested lenders were run ragged to process a surge in applications from those trying to secure rate offers before they rise again. For lenders, said Strutt, “the combination of managing lending volumes to maintain processing times as well as funding cost rises is leading to the increasing number of rate hikes”.
Hollingworth said: “Lenders are wrestling with volatile market rates and very significant spikes in volume as borrowers scramble to secure rates before they disappear.”