Hundreds of mortgage deals pulled from market amid threat of triple interest rate rise
Hundreds of mortgage deals were withdrawn last week and interest rates continue to rise as conflict in the Middle East impacts the UK economy.
Some City traders predict interest rates could rise three times in 2026 following the Bank of England’s decision to keep the interest rate at 3.75 per cent.
The bank’s Monetary Policy committee (MPC) voted unanimously on Thursday to keep the base interest rate steady, citing concerns that the war between the US and Iran would increase energy costs and fuel inflation.
More than 500 mortgage deals were taken off the market last week; This is the highest figure since the ‘mini budget’ presented by former prime minister Liz Truss. Meanwhile, the average rate on two-year fixed deals rose above 5 percent for the first time since August.
Experts had expected the Bank to cut its base interest rate this month following the decline in the headline inflation rate from December to January. Inflation is expected to rise again as the disruption in global oil trade causes energy and fuel costs to increase.
Swap rates that lenders use to set mortgage prices are also rising amid the conflict.
Moneyfacts financial expert Rachel Springall said: “Borrowers looking for the lowest fixed rates will be disappointed to see the decline of sub-4 per cent mortgages, but with rising swap rates these are not sustainable. “Lenders look at margins very carefully, so it would be unwise to price their deals too low if there are expectations of interest rates rising even in the short term.
“Unrest in the Middle East has unexpectedly led to swap rates rising, which has inflated mortgage rates and caused some deals to be temporarily withdrawn from sale… If this uncertainty lasts for a long time and inflation does indeed pick up, we could even see an increase. [base rate] Before the year is out.”
This will be a blow to homeowners looking to renew their fixed-term mortgages or potential homeowners looking for a deal.
Moneyfacts’ analysis shows that two-year fixed-rate mortgages currently average 5.28 percent, while the typical five-year fixed rate is 5.32 percent. These rates were 4.84 percent and 4.96 percent at the beginning of March.
Major lenders including Nationwide, Barclays and HSBC withdrew mortgage deals below 4 per cent earlier this week as these rates nearly disappeared from the market.
