Mortgage rates jump and deals disappear: what borrowers should do now
Mortgage borrowers are being urged to act quickly as lenders pull hundreds of deals and replace them with more expensive options.
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Conflict in the Middle East has seen oil prices soar, fuelling concerns that this will push up inflation in the UK. When inflation is high, interest rates are typically kept higher for longer to curb spending and help stabilise the economy.
Before the latest escalation, markets had widely expected the Bank of England’s Monetary Policy Committee to cut the base rate this month. However, these expectations have shifted, with the Committee unanimously voting to hold rates at 3.75% in March and some now pricing in the possibility of a rate rise later this year.
Mortgage rates move higher even when the base rate is left unchanged because lenders set their fixed rates using what are known as ‘swap rates’. These are market rates that reflect the cost of borrowing money over time, and they can rise even if the base rate remains steady.
Steeper mortgage rates will come as a bitter blow to homeowners whose fixed mortgage rates are due to end this year. The average two-year fixed rate currently stands at 5.32%, according to Moneyfactscompare, up from 4.83% at the start of March, while the average five-year fix is now at 5.37%, up from 4.96% at the beginning of the month.
Maike Currie, Personal Finance spokesman at PensionBee, said: “For borrowers - particularly the 1.8 million households expected to remortgage this year - it may mean mortgage rates stay higher than hoped, and could even rise if inflation spikes.
“Anyone coming to the end of a fixed-rate deal should review options early. Even small differences in rates can have a significant impact on monthly repayments.”
Mortgage options reduce
At the same time as mortgage rates are rising, choice is shrinking. More than 600 mortgage products have been withdrawn in the last week alone, the largest number to be pulled since the aftermath of the September 2022 mini-Budget and roughly equivalent to 10% of the overall market.
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “For homeowners, the return of rising mortgage rates will be deeply concerning. Average two and five-year mortgage rates have edged up this week, while hundreds of products have been pulled as rapidly shifting interest rate expectations ripple through the market. For first-time buyers or those refinancing, it means higher rates and less choice.”
If you do spot a deal you like, you may need to act fast, as mortgage products are currently disappearing in days. The average shelf-life of a mortgage more than halved from 33 days to 14 days between the start of February and March 2026, according to the latest Moneyfacts UK Mortgage Trends Treasury Report. This is the shortest shelf-life seen in over two years.
Despite current mortgage misery, experts urge homeowners and those looking to buy not to despite, as this is a rapidly evolving situation.
Ms Springall said: “The outlook might look a bit bleak for borrowers right now, but as we have experienced before, a short-term spike in market volatility can heal and interest rates are still far lower than they were a couple of years ago.”
Most lenders will allow you to secure your next mortgage rate three to six months before you need it to begin. The main advantage of finding a deal early is that if rates increase in future, you’ll have peace of mind that you’ve already got a competitive mortgage in the bag, but if rates subsequently fall, you should still have time to move to an alternative deal if one becomes available.
Oliver Dack, spokesperson at Mortgage Advice Bureau, said: “It’s well worth getting advice in the current climate and speaking to a broker to make sure a product is right for you.”
*This article is intended as generic information only and is not intended to apply to anybody’s specific circumstances, demands or needs. The views expressed are not intended to provide any financial service or to give any recommendation or advice. Products and services are only mentioned for illustrative rather than promotional purposes.
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