UK mortgage rates rise to highest level in a month
UK mortgage rates have climbed back to their highest level in a month, as renewed Middle East tensions lift lenders' funding costs and dim hopes of near-term interest rate cuts. Average two-year fixed deals now sit at 5.58%, with major High Street banks among those raising prices on new fixed products.
Key Takeaways
- Average two-year fixed mortgage rates stand at 5.58%, and five-year fixes at 5.6%, according to Moneyfacts — back near levels seen a month ago but still below April's 5.9% peak.
- Oil near $100 a barrel and fresh Red Sea disruption have revived inflation fears, pushing swap rates higher and prompting lenders to reprice.
- At least 25 lenders, including HSBC, Barclays, Nationwide, Lloyds Banking Group and NatWest, have raised selected rates in the past week.
- Experts say borrowers who need to remortgage this year should consider locking in early and comparing deals with a broker.
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Why are UK mortgage rates rising again?
According to the BBC, average mortgage rates have risen back to where they were a month ago as renewed tensions in the Middle East feed through to homeowners.
Lenders' funding costs have increased because markets judge that a prolonged conflict reduces the chance of central bank interest rate cuts. Mortgage rates had been falling as a ceasefire between the US and Iran initially appeared to hold.
Fresh strikes and Houthi militia attacks on oil tankers in the Red Sea reignited fears over global energy supplies. Oil prices hit $100 a barrel for the first time since May after several days of increases, stoking concerns about higher inflation.
Moneyfacts data reported by Yahoo Finance UK showed the typical two-year fixed rate jumped 0.04 percentage points in a single day to 5.54% — the biggest daily rise since 2 April — with five-year fixes up 0.05 points to 5.57%, the largest daily move since 31 March.
How high are average fixed mortgage rates now?
Moneyfacts puts the average new two-year fixed deal at 5.58% and the average five-year fix at 5.6%. Both have risen consistently in recent days, yet remain below the Iran war peak of 5.9% in April.
More than eight in 10 mortgage customers are on fixed-rate deals, so their payments stay unchanged until the deal ends — usually after two or five years — when they remortgage onto a new rate.
The five biggest High Street banks are among a host of lenders that have increased interest rates on new fixed deals. Adam French of Moneyfactscompare.co.uk said at least 25 lenders raised selected mortgage rates in seven days, with only a handful cutting products.
Bank of England projections cited by the BBC suggest just over five million homeowners should expect their monthly repayments to increase by the end of 2028.
What should homeowners do about rising mortgage rates?
Rachel Springall of Moneyfacts said 100 deals had been pulled temporarily as lenders reconsider pricing. She advised anyone who needs to remortgage this year to lock in a new deal with their existing lender ahead of time, and to seek broker help to check for better offers elsewhere.
"Any borrower hoping for rate cuts to become an ongoing trend will need to rethink," said David Hollingworth of L&C Mortgages. "Momentum has performed an about turn and now clearly shifted to fixed rates rising in the near term at least."
French added that higher funding costs leave lenders "with little choice but to reprice products, even if the Bank of England hasn't yet changed the base rate," and urged prospective borrowers to stay on top of options and seek independent advice.